When most people think of real estate, they think of a physical house, building, or property. But for those that do business on the Internet, they see real estate beyond what is offline. In our industry, domain names are sometimes referred to as e-real estate, or electronic real estate. Domain names are the real estate of the Internet.
I know this may be a hard pill to swallow for people who don’t have too much experience on the Internet, but it’s true. While domain names don’t have a physical presence in the world, they share many similarities to the brick-and-mortar real estate of the physical world. Let me explain…
Just like a house or building, a domain name is unique. There can only be one of each domain name in the entire world.
In the real world, the value of a house is heavily dependent on the location or neighborhood. The better the neighborhood, the higher the value. The location in terms of a domain name would be its TLD, or top-level domain extension. On the web, .COMs are the highest in-demand extensions for domains, so they are worth the most amount of money.
Much like physical real estate, domain sellers sometimes include comparables in their domain sales. Having recent sales data from similar domains can sometimes motivate buyers and justify pricing.
The physical foundation also affects the value of a house. The same can be said about domain names, except we’re not talking about something physical. Instead the foundation in the sense of a domain name, can be equated to its core strength. What would make a domain’s foundation strong or popular? It is the combination of several different factors, such as backlinks, PR, traffic, brandability, keywords, etc..
Number of bedrooms. Number of bathrooms. A backyard. A 2-car garage. Maybe a swimming pool. All of these things can either increase or decrease the value of a house. These individual elements of a house can be compared to the quality of characters or words contained in a domain name. The more sought-after a combination of characters or words, the more valuable it is.
The size of a real estate property also goes into determining its value. For homes, bigger is better. But for domain names, it’s quite the opposite. The general rule of thumb is – the shorter the domain, the rarer or more valuable it is.
Developed is More Valuable
Like a piece of land that has been developed into a beautiful, feature-rich house, a quality website will almost always add value to a domain name. There may be rare cases when a website wouldn’t add value to a domain, though. It could be a website that may have been penalized by Google for illegal activities or spamming.
Like real estate, domain names can be given appraisal values. In fact, there are several domain appraisal services out there. Some are automated and some done manually by a domain “expert.” Appraisals in both cases can vary depending on who is appraising the property. However, appraisals for domain names may be a lot more volatile because at the current time, there is no standardized system of evaluating the value of a domain name.
Real Estate Market
Like the real estate market, there is also a big online market for domains. When people want to buy or sell a house, they may go to a property listing site or a realtor to get their house listed on MLS. When someone wants to buy or sell a domain name, they can go to a domain marketplace like GoDaddy Auctions or Flippa. With physical real estate, you can hire a real estate agent or a broker to help you buy or sell. The same can be done with a domain. You can hire a domain broker to help you buy or sell a domain name.
Hopefully this analogy between real estate and domain names made sense to you.