Domains are now a digital estate on the internet. Like real estate, their value depends on their attributes. In this article, we will cover why a domain is a considered premium, what are the attributes that make it premium and what are the factors you should use to determine if you should purchase a premium domain.
What makes a domain a premium domain?
A premium domain is a domain that has a higher cost when compared to a standard domain. A standard domain will typically cost in the region of 10-20 dollars. A premium domain typically ranges between 305-100K dollars or even higher.
The value of an asset is related to the supply and demand for that particular asset. The value of an asset is low when the supply is high or demand is low, one the contrary the value of an asset is high if the supply is low and the demand is high.
There is a high demand for a painting by a famous painter like Van Gogh but their supply is very limited. Making a painting from the artist cost in the millions.
There is a high demand for houses with a sea view but their supply is typically limited making their price mark very steep.
The same concept can be applied to domains. Domains with certain attributes are very limited and desirable. Before we dive into their cost let us first understand the basic principles about domains.
A domain you purchase is bound to a Top-Level Domain. For example, if your domain is mydomain.com. .com is the Top-Level Domain. The Top-Level domain is owned by a Domain Registrar. For example, Verisign owns the .com top-level domain. There is a large amount of Top-Level-Domains .com, .net, .org, .biz, etc. .com is the most commonly used.
Domains are typically sold by Domain Registrars like Godaddy, Namecheap. They sell domains on behalf of the Domain Register. It is the same concept of the car industry. Domain registers are like the car manufacturers that build cars while the Domain Registrars are the car dealers that sell cars.
A Domain Registrar can sell domains of different types mainly
- Available domains. These are domains that are not owned by anyone and can be bought from the domain registrar. The price will depend on the Top Level Domain and Domain Registrar.
- Expired domains. There are domains that have not been renewed by the owners and are put on sale by the domain registrar. The price of the domain will depend on the highest bid. If an expired domain is not bought any anyone it goes back to the available list.
- Premium domains. Premium domains are domains that are owned by individuals or organizations that want the sell the domain. The price of a premium domain is set by the owner of the domain.
What are the attributes that make a domain a Premium Domain?
.com and .net are the most common Top-Level-Domain. .com is the most common, in 2017 there were 131 million registered .com domain. This means that the availability of the domains is very limited for .com domains making such domains more valuable than other domains registered in other Top-Level-Domains.
Amount of words
The amount of words in the domain have a direct impact on the cost of the domain. A shorter domain is easy to remember and to type by the user. The most expensive domains are single-word domains followed by the double-word domains. Depending on the keywords three-word domains can still be premium.
The keywords in the domain also have a direct impact on the cost. Search engines will give a domain a better rank in the domain if the keyword matches the search of the user. The higher the search volume of a keyword, the higher the cost of the domain.
The following guideline gives an overview of how to determine the valuation of a domain.
Should you by a premium domain?
A businesses investment is deemed good based on the ROI (Return of Investment).
A premium domain can be very helpful to promote your site as it will rank better on search engines. It generates a lot of traffic to your site which will drive better revenue.
A premium domain will also give high credibility to your business. If a business has a flashy office space it gives its customers the impression that the business is legitimate and of good quality. As opposed to an office is a sketchy part of town.
The same concept can be applied to domains. Which would you trust more to buy a car?
car.com or carsreallycheap.biz
A premium domain is an investment in itself. Even if you don’t use it, its value will increase over time. You can sell it further down the line at a higher cost making profit from the sale.
How to buy a Premium Domain?
Apart from the initial cost, a premium domain has a higher cost when it comes to renewal and transfer of the domain. Cost may also vary between the different Domain Registers like Godaddy or NameCheap.
The Domain Registrars act as an intermediary between the seller and the buyer. They get a commission of the sale.The commission will vary between Domain Registrars, It is best to shop around to determine the best deal. Given that you are buying an expensive asset the commission will have a direct impact on the price
For a review of the best Domain Registrar follow this guide.
Image credit: Premium domain via Artist_R/Shutterstock