Why are certain domain names expensive and hard to get?

It’s thankfully not a recurring item on the agenda to have to acquire a domain name that is already taken. But it’s still a fact that all businesses have one, and that any entrepreneur will inevitably need one. It is also a fact that it likely will not sit there waiting for you. When the day comes, it may therefore be useful with some background knowledge.

Firstly, it may come in handy to know why a specific domain name becomes valuable, to you or to others.

Short domains are often registered. Domains that are comprised of single words are taken. Even two-word combinations and longer domains can be occupied in case they are easy to say or pleasing to the eye. It’s inevitable that whatever you attempt to pick is likely already in use and off the visible market. But some are readily for sale, waiting for their time to shine.

One way to explain domain name value is that the unique “physical form” of a domain name (a unique sequence of characters) can encompass a multitude of traits rooted in aesthetics and significance. These traits may enable interpretations that align with potential applications. When they do, the value of the domain name will correspond to the magnitude of the potential demand behind these applications.

The conclusion is that certain domains inherently possess greater versatility, evocativeness, descriptiveness, relevance, beauty, applicability, or utility than others. They are ”good names”. (This is why they are taken in the first place. And in all honesty likely why you picked it for your business as well.)

Some domains accordingly have thousands upon thousands of prospective buyers, and some of these buyers may be ready and able to pay a great deal for the privilege to be found in their name of choice. In some cases – millions of dollars.

Domain investors?

Essentially, what we have described is the premise and promise of the business of domain investment. As a domain name buyer or a domain name broker, domain investment analysis may therefore be important to understand.

It should be obvious that the reason that a domain is taken is that someone saw value in it. This is also why the current owner will not give it up easily, or even for a sum that you may consider fair. (In fact it may extinguish any hope of acquiring the domain to wrongfully argue that the price is exorbitant.)

Unlike registrars (where domains are registered), who treat all domains equally, or a domain end-user who only needs one specific domain, domain investors look deeper into which domains are registered and why. Their expertise lies in understanding the unique value of each domain.

Even though you may not understand why the price is high for the domain you need, the process of arriving at a price point has many parameters that a domain investor understands well. Here are some that have been used for a long time, and that can be considered the basis of how a domain generally operates.

Legacy Factors Influencing Domain Value

1. Search engine keyword data: The idea is that the most searched-for terms also correspond to the most valuable domains. Search serves
as a blueprint for domain demand. More searches equate to more value.

2. Cost Per Click: Different search terms hold varying values not only in terms of search volume but also in terms of the value of converting a lead into a sale. This is gauged through metrics such as “Cost Per Click” (CPC).

3. Registered extensions: With nearly 1,600 domain extensions, the simple premise is that the more extensions containing a certain string are registered, the stronger the indication that the registered domain is valuable.

4. Traffic: Some domains, through prior use, boast backlinks that still generate traffic. Other factors include the extent of “type-in traffic” and the domain’s impact in search engine contexts, where it’s argued that more descriptive domains yield higher click-through rates.

5. Incorporations: Databases monitor all existing incorporations globally. A simple search reveals the number of active companies using a particular string as their business identity.

6. Trademarks: The number of trademarks can indicate the likelihood of demand for the domain in question, subject to priority based on registration date.

7. Comparable sales: Historical domain name sales databases serve as indicators of future sales and prices for “similar” domains. (For a primer on one fundamental problem with this idea, consider the problem of induction.)

Metrics like these underpin the most popular automated evaluation tools of the day, like the GoDaddy appraisal tool, which claims to factor in the variables relevant to a comprehensive domain evaluation.

However not all domain investors regard the metrics above as the 10 commandments. Beyond the traditional approach described, which is heavily influenced by ideas around search, there are also domain investors that focus on other factors, such as how names portray and convey appealing impressions in a contemporary brand name context.

Contrary to domain names that rely on literal search terms, ”brandable” domains focus on unique, memorable names that resonate with your target audience, offering a distinct advantage in building a strong online presence.

If you venture into the domain aftermarket, understanding the market will help you make a more informed decision. Whether you’re acquiring a domain for your business or exploring the aftermarket for domain names, knowing what makes a domain valuable can prove useful.

And in case you don’t care to venture into the wilderness of the aftermarket on your own, Dotkeeper has you covered. We have the connections and the experience to get the job done and have helped hundreds of clients to get their names.

In our next article, we delve deeper into how ”brandable” domain name evaluation works, which may also be useful to know when there is suddenly a taken domain that you need to acquire.