There are a number of important factors that drive domain-name value. The frequency of domain-name use as a keyword in search engines is not one of them.

Only when a domain name is associated with an active Web site do search engines become a relevant value driver. Specifically, it is the site’s rank in search results that is critical in determining a domain name’s value. In fact, searches need not even be related to any word in the domain name being valued. The site-relevant keywords are those for which the site ranks high. Obviously, the more frequently the site-relevant keywords are searched, the more valuable the ranking.

Some incorrectly argue that a domain name containing frequently searched keywords has higher value (other variables being equal). But there is no solid evidence to such practices by the major search-engine companies. Moreover, if this claim were true, one could cheaply register such domain names with frequently searched keywords to be used as doorways for search-engine-ranking purposes. Furthermore, if such domain names truly improved ranking, major brand-name companies would not appear on search results unless the brand names were used as keywords, as every company’s Webmaster would be creating such doorways, which would eventually bring the ranking criteria back to true relevancy of a site’s content as it relates to search keywords.  However, companies using trademarked brand names could face legal challenges for intellectual-property violations. Thus, even if there are short-term gains to be made from doorways, they are not a sustainable source of competitive advantage.

It is true that a domain name associated with a site having high search-engine ranking would command a higher appraisal value, other variables being equal. But that does not mean that paying for high ranking necessarily translates into value creation. The buyer pays a premium for high ranking. Thus, the only way for the buyer to create value depends on that buyer’s ability to improve the site’s ranking and/or to increase clicks from search engines to the site. This concept of value creation is no different from that related to selling any other asset. Hence, location, location, location is irrelevant when it comes to value creation unless you can improve the location, location, location.

Alex Tajirian, President & CEO
DomainMart

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