Calculating the Potential Value of an Exact Match Domain

exact_match_domain_costWe recommend that all of our clients adopt a multi-site strategy for rankings, as it increases the number of sites they can have ranking for any particular target keyword phrase. This multi-site strategy also helps mitigate some of the risks of search engine optimization. For competitive keywords, finding such domains can be a difficult task. However for long-tail terms it can be much more cost effective.

A great example is electricviolinshop.com. Don’t try beating them in the search results for almost any query with “electric violin” in it!

Often you can find domain names with subtle variations of the long-tail terms you are targeting available for $10 from your favorite registrar. In some instances, though, you may be forced to purchase them from an existing owner or through an auction. Virante has a simple formula we use in helping our clients determine an acceptable price to pay for these domains.   Please note this is not a method that applies to all domains, but rather for long-tail terms in which an exact match domain would likely obtain top positioning in the search engines with little “encouragement.”

Exact Match Domain Value Formula

The formula Virante suggests for buying an exact match domain is pretty straight forward. You will need to know the following:

1. How many searches occur for the exact keyword phrase in Google per month (X).  You can obtain this data from Google Adwords Keyword Tool.
2. Your expected conversion rate for people visiting that page (Y).
3. The profit you would earn on each conversion (Z).
4. How many months you are willing to wait to recoup your initial investment (M).

We assume with an exact match domain you will rank #1 for that keyword and attract 35% of the available traffic. You can then figure out the revenue that the site would bring in monthly by using:

X*Y*Z*.35

Then you subtract the expected monthly costs of maintaining the site (hosting and domain name registration fees; probably somewhere in the neighborhood of $10/mo):

((X*Y*Z*.35)-10)

Finally, you multiply it by the number of months you are willing to wait to recoup your investment:

((X*Y*Z*.35)-10)*M

And that gives you the price you can pay to buy the exact match domain.

So, lets assume our target long-tail keyword gets 170 visitors a month. Let’s also assume you make $100 profit on each conversion, you expect a 5% conversion rate, and you can wait up to 2 years to recoup your money (24 months):

(170*.05*100*.35)-10)*24 = $6900

Under those circumstances, you could pay up to $ 6900  for the long-tail exact-match domain. Granted, most people want to recoup their money in 12 months, and expect only a 1% conversion rate. In this specific case, you would likely want to spend less than $600 on the domain. Knowing your profit margin and your ability to wait to recoup your money is extremely important.

Virante normally recommends to clients that they advertise using Google Adwords for that exact keyword to determine the expected conversion rate and potential traffic. You can also get a clearer estimation of the number of exact match searches that way, by looking at your impression data.

(Photo credit: Eric M. Martin on Flickr. Used through a Creative Commons license.)

Calculating the Potential Value of an Exact Match Domain by

Hi, I am Russ Jones, CTO of Virante, Inc. I am the father of two beautiful daughters, happily married and currently gainfully employed – as long as I keep myself relatively censored on this site :-)

Comments

  1. Good article, however by this logic, a keyword that gets 10,000 exacts per month, ceteris paribus would value the domain at $4.2 million… Can the domain market still maintain deals of this value?

    Of course it’s all subjective, but still interesting to contemplate as I have just the domain to fit that criteria!

  2. Nice formula, but it’s hard to get that much from domain sales usually. I suggest you get keyDomainTool to find exact match domains veeery quickly.

  3. runner2009 says:

    Exact Match Domains and multi-site strategy; In my opinion, at one time this strategy did work and worked well especially in low volume and low competitive keyword niches, but is not a strategy to build ones brand or site upon.

    In fact Matt Cutts acknowledged this in the following Youtube video http://youtu.be/rAWFv43qubI. Near the end of the film at about 2:32, he said that the search team was thinking about turning down the part of the algorithm that gave too much weight to keywords in a domain. This too if you remember the last month or two where they have also adjusted downward that weight given towards the exact match anchor-text in a link – thus diminishing the advantage of keywords in the name of the business when linking using the business name.

    Further, one see less and less ‘get rich quick’ schemes for sale using this technique. If in the future it is more and more about site authority, branding and brand mentions across the web, it seems that one would dilute both their efforts and brand by having multiple domains. Why not make one strong domain that promotes ones brand?

    I also, believe that the statement “assume with an exact match domain you will rank #1 for that keyword” is a very big assumption and it that was the case you would see less than 100 searches a on the site.

    What has surprised me over the years is that in many different niches the adage that the top ranking in the SERP will garnish a 35% to 41% CTR. I have found this to be true, but in many low volume searches, especially with long-tails the CTR is often far less.

    I am not saying that there isn’t possibilities, but I think they are far fewer today and going forward it would not be a strategy that I would be building my web empire on.

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  1. [...] match domains as a defense mechanism – Many “brands” undergo the practice of pursuing and grabbing attractive exact match domains as defense mechanisms for their rankings. This can be an expensive practice, but when it prevents [...]

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