DOMAIN VALUATION
A domain must perform one function, attract new customers. The most appropriate domain valuation method involves the Lifetime Value of a New Customer. The formula is as follows:
Domain Value = (Lifetime Value of a New Customer) x (New Customers Per Day) x (365 Days) x (Years)
Example
Lifetime Value = $1,000
New Customers Per Day = 1
Years = 20
Domain Value = $7.3 million
A domain's valuation can be determined by several other methods, including the following:
- the value of the idea
- the profit margins, when applicable
- the gross sales, when applicable
- the cost of a sign that can be seen worldwide, even from outer space
- the cost of an employee who works 24/7/365
- the cost of digital advertising (ex. Facebook, Google, etc.) for having a weak domain name
The benefit should be calculated over a 20 year period, minimum. If a domain purchase is financed over time, it should more than pay for itself each month.
Sources: Rick Schwartz and Michael Saylor