How to value a domain name and sell on the secondary market?

Since the early 2000s, the secondary domain name market has experienced significant growth, driven by the emergence of specialised brokers and platforms dedicated to domain name trading.

A domain name is much more than a web address: it is a showcase, an identity, even a strategic asset. Businesses and investors have understood this well: a good domain can generate traffic, strengthen a brand and make all the difference against the competition.

This enthusiasm explains the scale of the market, where some sales reach record highs, such as lasvegas.com, sold in 2005 for… 90 million dollars!

Today, the value of a domain name is a key issue in any digital strategy.

To shed more light on the subject, Netim interviewed three industry experts:

• Anne-Laure LEOBOLD, Key Account Manager Europe / Asia-Pacific at Sedo, the world leader in domain name marketplaces.
• David CHELLY, renowned domain name specialist for 20 years, member of the user college of Afnic and co-founder of NDDCamp.
• Philippe FRANCK, broker specialising in domain names for 25 years, founder of Domainium, and co-founder of NDDCamp.

Their feedback and practical advice provide a better understanding of the evaluation criteria and the stakes of this parallel market.

Their feedback and practical advice have enabled us to provide an overview of the key factors to consider to value a domain name, and the challenges of the secondary domain name market.

Defining the value of a domain name

What are the evaluation criteria for a domain name?

There is no magic formula for valuing a domain name. According to our three experts, its value is based on a mix of objective criteria (length, extension, history…) and subjective ones (desirability, potential…), which must be combined for a reliable estimate.

David Chelly distinguishes two types of domain names, with different uses and valuations:

• SEO-oriented domains, assessed according to technical criteria (quality of inbound links, history…)
• Domains intended for branding, valued for their brand potential (memorability, sound…)

The value also depends on the buyer’s profile:

• A reseller aims for a domain name with potential added value
• An end user is looking for a strategic name for their brand

Here are the key criteria to consider when valuing a domain name:

1️⃣ Length and simplicity

The length of the domain name remains one of the very first criteria. For Philippe Franck, “the value of a domain name depends on its desirability. As a rule, users will prefer short names with a well-known extension”. The shorter a name is, the more memorable, easy to type, and therefore desirable it is.

Anne-Laure Leobold confirms: “shorter domain names generally have more value than longer names.” David Chelly also highlights the importance of syntax, and points out that the presence of hyphens, accents or numbers can harm readability and reduce the attractiveness of the name.

2️⃣ Domain extension (TLD)

The extension carries significant weight. “Certain extensions, such as .com, are more sought after and have more value than others”, explains Anne-Laure Leobold. She also notes that certain trends can impact the value of a domain name, “for example, the growing popularity of AI has led to an increase in demand for .AI domains. Similarly, the growth of the technology sector has led to an increase in demand for .IO domains.”

For his part, Philippe Franck is categorical: “A few extensions have managed to create a buzz, but remain marginal compared to .COM or national extensions like .FR.” It is also worth noting that .COM alone represents about 43% of domain names on the web, or 157.2 million .COM sites!

3️⃣ Relevance of keywords

Historically, Exact Match Domains (EMD) such as assuranceauto.fr or hotelparis.com have carried significant SEO weight, as Anne-Laure Leobold points out: “Domain names containing relevant and popular keywords, such as ‘immobilier’ or ‘crédit’, can have more value than those that are less relevant, like ‘farine’.” Philippe Franck puts the importance of keywords into perspective, highlighting the “unpredictability of SEO rules.”

4️⃣ SEO history

The SEO history of a domain name, its backlink profile and its previous content can influence its value, “particularly if the existing traffic is important for the buyer” Anne-Laure Leobold tells us. Was it an inactive site? Was the content relevant? Has it had any SEO penalties? It is important to check these points.

5️⃣ Brand availability and legal aspects

Owning a domain name close to an existing brand presents a risk of litigation. The brand could initiate a UDRP procedure (Uniform Domain-Name Dispute-Resolution Policy), or legal action for infringement of intellectual property rights, which could prove costly for the domain name holder.

Philippe Franck qualifies this: “Legal aspects are important but should not become an obsession. Clearly, it would be foolish not to respect the rights of a well-known brand, or the rights of a brand in the classes of activity for which it is registered, but there is still considerable freedom in the choice of domain names outside these strict constraints.”

From her point of view, Anne-Laure Leobold rather recommends caution and also recalls the emblematic case of milka.fr, seized by Kraft Foods after legal action against an individual.

What are the different valuation methods?

Valuing a domain name is not an exact science. As we have just seen, the value of a domain name depends on many different characteristics. In his book The Central Role of Domain Names (2020), David Chelly identifies 3 valuation methods for assessing the value of a domain name: archive data, mathematical models and human evaluations.

Comparative analysis (sales history)

This method consists of comparing a domain name with other similar names already sold, with the aim of determining an indicative price range. Anne-Laure Leobold confirms: “The sales history of similar names can provide valuable indications of the potential value of a domain name.”

But David Chelly warns of the limitations of this method: the sales that are publicised are often exceptional (for example, hotels.com at 11 million dollars), whereas the majority of transactions are for a few hundred euros. Moreover, databases can be incomplete, as some sales are confidential.

Automated valuation tools

In recent years, many automated estimation tools have emerged online. They provide a quick valuation, but rely solely on mathematical formulas ignoring all subjective aspects and do not take context into account.

These tools can be useful for getting a rough idea, but they often produce very fanciful estimates, sometimes amounting to tens of thousands of euros… for domains that are in fact unsellable.

Philippe Franck considers them “incapable of estimating the desirability of a word that does not appear in the dictionary”. He jokes: “you might as well ask them the value of a red car with 4 wheels and 2 headlights!”

Human valuation

Our three experts agree that the most reliable valuation is human and contextualised. This method allows for a more precise estimate, taking into account both objective criteria as well as context, the stakes, the subjective potential of the domain name, and the buyer’s profile.

Using professional brokers is the best way to obtain a credible valuation, as they are able to analyse a domain name in its entirety. With their experience, they can adjust the analysis depending on the target (investor or end user), the rarity and desirability of the name, or the existence of projects linked to the name.

David Chelly reminds us that this method is essential because “ultimately, all sales are different, and the price mainly depends on the means and motivations of the buyer and seller.”

Selling domain names on the secondary market

How does the secondary domain name market work?

The secondary market refers to all transactions involving domain names that are already registered. Unlike the primary market (where a name is registered for the first time via a registrar), this involves resale between individuals, investors or professionals.

It is, in a way, a second-hand market, but one where the second-hand value is often higher than the “new” value, depending on the history and potential of the name, as we saw earlier.

End users or investors: different approaches

An essential point to understand about how the secondary market works lies in the difference between end users and investors. As Anne-Laure Leobold points out, these two profiles have neither the same objectives nor the same budgets:

“End clients, such as businesses or organisations, are often willing to pay more for a domain name. They may be looking for a specific domain name, and the domain name’s value is directly linked to their business objectives. On the other hand, investors or resellers have a smaller budget and are looking for potential resale value. They may be willing to negotiate the price of a domain name based on its resale potential, rather than its immediate value.”

Philippe Franck further notes: “The end buyer thinks in terms of the added value the domain name brings to their project, whereas the investor must take into account the often long resale period and the margin necessary to maintain their entire portfolio, the annual renewal of which can be very costly.”

Indeed, domainers (investors) are looking for resale value. They buy at a low price in anticipation of a possible capital gain. Their budget is therefore more limited, and their goal is to build a profitable portfolio over the long term. David Chelly explains: “a reseller will generally not buy a domain for more than 30% of the end-user price.”

Domain name sales methods

There are several techniques for selling a domain name.

Firstly, the owner can try a proactive approach by identifying potential buyers and contacting them directly. This strategy requires time, sales skills and a good knowledge of the targeted sector.

The owner can also go through brokers who act as professional intermediaries between buyer and seller. Anne-Laure Leobold explains that “the price of a domain name can vary considerably when a broker negotiates. They can get in touch with potential buyers ready to pay top price for highly sought-after domains”. Indeed, the broker can act on behalf of a seller (to get the best price), or on behalf of a buyer (often anonymously, to negotiate discreetly at the lowest price).

Finally, and this is the best option, an owner wishing to sell a domain name can go through a specialised platform, such as Sedo (world no. 1). These dedicated platforms allow for a more structured connection between sellers and buyers. Sellers can list their domain name at a fixed or negotiable price and benefit from international visibility (on the Sedo marketplace but also on the websites of partner registrars, where the domain name for sale will also be visible). The technical transfers and money transfers are secure, and complete services are offered: a team of professional brokers for negotiation, and a parking page service for domains for sale.

Parking pages: still useful?

Until the early 2010s, parking pages were a real goldmine for domainers. These pages allowed an unused domain name to be monetised by displaying sponsored links related to the domain name. In his book The central role of domain names (2020), David Chelly describes this period as a golden age, during which some investors managed to make their portfolios profitable solely through advertising revenue. Since then, revenues have collapsed, largely due to the evolution of search engines, the drop in cost per click, and the gradual loss of interest from Internet users in these pages without real content.

For David Chelly, today they no longer have any real value. However, Philippe Franck notes that their main advantage remains to indicate that the domain name is for sale, allowing a potential buyer to contact the seller directly. Anne-Laure Leobold also offers a more nuanced view: the returns are obviously no longer what they were ten years ago, but these pages can still generate some revenue, at the very least to cover the domain’s renewal fees or the platform’s commission costs (note that domain parking on Sedo is free). Anne-Laure also observes that today, content is king, and investors tend to work on their parking pages by adding useful content to make them more “Google friendly.”

What advice is there for buying or selling a domain name?

Experienced domainers know: patience, caution and anticipation are essential. Here is some advice for buying and selling domain names.

➡️ Carry out thorough research

All three of our experts advise studying the domain name carefully before buying it to avoid unpleasant surprises:

• • check the WHOIS history (is the seller really the owner?),
  • check the SEO history (backlinks, old content, any penalties),
  • eliminate any legal risks (existence of a registered trademark, etc.),
  • beware of names linked to current events (buzz, one-off events, passing trends) which may seem attractive in the short term but whose value can quickly fall. Our experts agree: these names are rarely profitable.

➡️ Control your costs

The secondary domain name market is a low liquidity market, meaning that transactions are rare: domain names are not easy or quick to sell. David Chelly confirms that most domainers sell “only 1 to 5% of their portfolio each year”, which means strictly controlling renewal costs.

Philippe Franck gives us an example by imagining one sale per year from a portfolio of 50 domain names: “That means 50 renewals for one sale. At €10 per renewal, this represents a cost price of €500 per domain name sold, to which must be added the acquisition price and the margin necessary for any good trader, that is to say a multiplier coefficient of 2 to 3, or even more in order to be able to develop the portfolio.”

However, Anne-Laure Leobold specifies: “Liquidity depends on the quality of the domain, with high-quality domains selling quickly, while less attractive domains can take longer. With around 3,000 sales per month on the Sedo site alone, demand for domain names has remained high for more than 25 years and the market remains dynamic and active.”

➡️ Set your prices

There are several sales formats for reselling a domain name:

• • • Open offers (make offer): these can generate interest but may prolong negotiations and put off buyers in a hurry. “The huge offer spontaneously made by a buyer is the beginner’s fantasy…” concedes Philippe Franck.
    • Auctions: these are attractive for highly sought-after domains or those that already generate traffic, but you need to watch out for fraudulent auctions that are artificially inflated. Anne-Laure Leobold explains that auctions are ultimately more suitable for “selling domains that are no longer needed or that are not essential assets. In this case, setting a lower maximum price can actually lead to a higher final sale price.”
    • Fixed prices: this is the simplest and most effective method. A displayed price reassures potential buyers, speeds up the process, and gives the domain greater visibility on platforms. Anne-Laure Leobold confirms that “fixed-price domains sell up to three times faster.”

➡️ Focus on quality rather than quantity

“The common mistake of the beginner, carried away by their enthusiasm, is to register dozens […] of names betting on an increase in their value in the years to come.” – David Chelly (2020)

There is no point in accumulating dozens of domain names with no real value. Professionals recommend building a tight portfolio, with real potential for use, and if possible diversified. To achieve this, Philippe Franck insists, you should not rush: “The risk is wanting to build your portfolio too quickly. It takes time to understand the mechanics of the market, to find one or two niches where you will be alone or almost, and to know how to wait for opportunities.”

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In the end, the secondary market for domain names is far more complex than it appears. As we have seen, estimating the value of a domain name is not a simple exercise: a good domain name is judged according to a combination of technical and subjective criteria. Its value can also vary depending on the buyer’s profile, the context, or the sales strategy. Therefore, buying and selling domain names on the secondary market requires analysis and patience.

Finally, David Chelly advises against getting into domaining, given the low liquidity of the market. “At present, it is risky to get into this market, which is highly overrated. It requires a very large investment and in-depth knowledge to make it your main activity.”

On this subject, also check out our interview with David Chelly: Domainer: is it possible to make money selling domain names?

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