Direct Navigation Economics
John DeMayo has an excellent breakdown of how to value a domain name, leading up to his valuation of one of his own: FreeEssays.com
John says the domain: “Averages 337 visitors per day and $56 revenue per day over the last month or so.” If you extrapolate that out, the amount equals about $20k per annum. He wants $200k, which is 10x revenues but that assumes traffic will be flat (i.e. not decline or grow).
The metrics are very similar to traditional real estate valuation. The risk is a lot higher however, as the predicability of traffic and confidence levels in monetization are not there yet. But if you can get in on a 6-7x mulitple, that risk is certainly palatable.
Particularly interesting is the areas the domain describes, as essentially you are betting on the demand and pricing of that category (in John’s case online education).
While the domains may already be taken, the second wave of speculation may occur on categories of advertising that will grow the fastest. That is, deposit account advertising will grow faster than say mortgage advertising in the next five years. But if both deposit based and mortgage based advertising are valued on the same present-day metrics than obviously the deposit based domain name will end up a steal. I’m guessing it is this kind of thesis that is driving players like iREIT.
