What’s that domain worth?

Registered business valuer Blair MacDonald explains: “I’m looking at the income stream that the business generates, and the website traffic generated by the domain name will be linked in with that. A good address will positively affect the sale price of the business since it will be generating leads, sales activity, and be placing the business at the forefront of the consumers’ attention when they are searching online. This will be evident in the revenue streams generated by the business, which in turn directly affects the price the seller can expect based on the return on investment method of valuation.

“Unique visits is a useful figure, as is the amount of email traffic generated from the online contact form. But every business should also have the person who answers their phone ask new clients ‘How did you hear about us?’ That’s another metric that demonstrates the value of the web address.”

Validating value

Senior intellectual property lawyer Michelle Eadie from Sydney firm Simpsons says some of the factors a business owner can use to support the valuation of their domain name are:

• Whether the business has trademark registrations protecting the domain name or any brands contained in the domain name;
• What is the reputation in the domain name and any brands in the domain name;
• What is the level of Internet traffic to the website through the domain name, and how much of this converts to customers or clients;
• What is the revenue of the business and how much of this is directly tied to the domain name (or website operating through the domain name).

With many more options available to businesses through the .sydney and .melbourne domains, she suggests looking at URLs which can be of value for reasons other than including the name of the business.

“For example, the domain name might describe the industry the business is in. A well-known example is realestate.com.au. This domain name is very valuable to REA Group for obvious reasons.”

However, she warns there’s a downside too. “It’s difficult to claim any IP rights in [that sort of] name. As a result, REA Group is having notorious difficulties with protecting the name through trademark registration.” So one for your business and one for your industry, product or service is probably the best idea – then one is unique and easier to protect and one is generic and drives high traffic. Both can point to the same website.

With Australian consumers committed to buying local, even for online purchases, a web address that announces a business is local can be a valuable asset.

Identifying your business as Australian is a valuable commodity, so obviously a .sydney or .melbourne domain name for anyone operating a business in those cities is especially valuable, and may even end up boosting the price you get when it comes time to sell.