Automated domain appraisals aren’t perfect but smart domainers can use them to their advantage.
GoDaddy released its automated domain name appraisal system to the public last week, and quite a few domainers disagreed with the values it provides.
Valuing domain names is very difficult, especially with automated tools. Domain names are unique assets. The sales price of a domain name has a lot to do with how much money the buyer has and how much the seller is willing to hold out for.
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Still, automated appraisals provide immense value to domain name investors. You just need to know how to use them properly. If you dismiss tools like GoDaddy’s and Estibot’s out-of-hand, I think you’re leaving some great data (as well as profits) on the table. Here’s how I recommend using automated appraisals:
1. Don’t accept appraisals as the definitive answer.
Most domainers won’t have a problem with this. This isn’t limited to automated appraisals, either. Even appraisals by experts are not definitive. They are just a data point. In some cases, they will be very good starting points when you consider the data behind them.
2. Review the rationale.
Both GoDaddy appraisals and Estibot don’t just give you a number. They give you a rationale for the value. In GoDaddy’s case, it spells this out in plain English. In Estibot’s case, it’s a lot of data.
For example, Estibot might show that your .com domain name is also registered in .net and .org. That’s a pretty good sign of value.
Sometimes the rationale behind an automated appraisal will be wrong, so you need to take a look at it.
For example, I ran a domain name through GoDaddy’s tool that had three numbers and a letter in it. GoDaddy appraised it much lower than I sold the domain for this year. The reason was clear when I looked at the comps. My domain was a financial term from the tax code but GoDaddy was comparing it to other domains with three numbers and a letter that didn’t have secondary meaning. I wouldn’t expect an automated appraisal to pick this up easily. Estibot misses on this particular domain as well.
3. Review the comps.
Speaking of comps, comparative sales can be a goldmine. Even if you don’t agree with the value a domain appraisal gives you, comps can be excellent for determining what you think a fair value is.
One of the domains I tested on GoDaddy was AtlantaBodyshop.com. A comp included with the appraisal was KansasCityBodyshop.com. If a buyer tries to tell me I’m crazy for expecting my asking price, I can point to the higher sale of the Kansas City domain to show that it’s not crazy.
One area in which I believe GoDaddy’s appraisals excel is in finding good comps. Keep in mind that GoDaddy probably has more sales data than anyone in the world.
4. Use appraisals for buying.
Think automated appraisals are uniformly low? Then use them for when you buy domain names.
I’ve already used this to my advantage. I recently bought a domain name from someone who used GoDaddy’s appraisal syatem on his own intiative. It gave a reasonable number and he used it as his baseline for an offer. I offered about 60% of the appraisal value and he accepted. Consumers trust GoDaddy and you can use this to your advantage.
5. Find outliers with appraisals.
Every six months I run my entire portfolio through Estibot’s bulk checker. My goal is to find any outliers that I might not have noticed or that have changed in value.
Automated appraisals are good at finding diamonds in the rough that you might have overlooked. Perhaps some other company has recently registered the .net and .org to match your .com. Perhaps search volumes for a domain have spiked. Maybe there have been a lot of recent comp sales. If nothing else, run your domains through Estibot’s bulk checker before letting them drop.
I firmly believe that automated domain name appraisals have value. Are they spot on? Absolutely not. Are they built on great data that can inform your buying and selling decisions? Absolutely.