When you buy a domain, you also acquire its natural traffic. If it’s a few thousand potential customers a year, that kind of traffic is really valuable. But how exactly is it worth it? How shared web hosting work? How do domains work? All answers to these questions are down below.
This is easy to calculate. All you have to do is multiply the value of one quality visitor by their quantity. There is only one nuance: valuable future traffic, not historical traffic. Hence, it is necessary to forecast. Predicting is more difficult than verifying historical data.
In this article, I will share how I calculate the value per visitor and future traffic, and. These principles will help you understand the value of organic traffic to both domain sellers and buyers. By knowing the exact value, you will make more rational decisions in domain purchase transactions.
Domains that attract visitors
Old domains effortlessly attract visitors in 3 ways: directly, through links from other sites, and from Google.
In most cases, most traffic from legacy domains is direct. People remember the previous site or have it saved as a bookmark. For example, no matter who is at one.lt address, people who believe in something from the past will come to it for a long time to come.
There are also people who, instead of using Google, lead the keyword directly into the address field and add the domain suffix. As a result, domains like sex.com have become the most expensive in the world.
A third shuffles domain suffixes or expects a local version of the site. Fifa.lt always receives quite a lot of visitors during the championships, although their topic sites have not been there.
Eventually, people get lost. E-bay.com, eebay.com, bay.com ..? Even unused domains that sound like something get visitors.
Some domains, mostly bankrupt companies, have backlinks to other sites. New visitors are coming from them. If there are enough links on serious sites as well, such domains maintain Google rankings even without sites. For example, e-bay.com effortlessly receives visitors from other sites and search engines, although the site has not been available at that address for several years.
Domain name – advertising channel
How to use those visitors to the domain? If you’re creating a new site, the easiest way is to choose an old, visitor-friendly domain.
However, advertising is usually of interest to owners of existing websites. And even start-ups want to have their own name. Then all you have to do is redirect the old domain to your new domain.
In your site traffic statistics, you will see that visitors come as you would from any other site where you advertise. I suggest identifying them identically. If it’s a visitor of identical quality, it doesn’t matter if it came from an ad on Delfi.lt, Google AdWords, or was redirected to another domain. If there are any qualitative differences (e.g. time spent on the site), I will describe how to include it in the evaluation later.
How much is your visitor worth? For example, if you earn an average of € 500 from 1 sale and buy 2% from visitors, then one visitor is worth an average of € 10 (€ 500 × 2%). But only you know that. You don’t talk about it when you buy advertising.
So when evaluating the traffic of visitors to your domain, let’s compare it to alternative prices, not how much value it creates for you. That value should be much higher than the price and stay with you.
Price per visitor
Before pricing, you need to understand what visitors to our domain are. If they come from airport sites and Google when searching for plane tickets, their group is very specific and clear. If 30% of them click on advertisements for airline tickets to Paris or Amsterdam (CTR) published on a domain page, their willingness to buy and purchasing power is also clear.
Visitors who are ready to segment and buy-in detail are like a well-optimized Google AdWords campaign. Then it remains to be seen how much it costs to attract such a visitor there. Let’s say in our example it would be € 1.00.
If we don’t know where or what our visitors come from, we can rely on the demographic information from the cookies they bring. When we only know demographics, but visitors have not revealed their intentions, such an audience is tantamount to clicking on ads on themed pages.
If it is 20-35 years old. age women who press references to raise children, their group is clear. We can check how much it would cost to attract such a visitor with billboards on Lithuanian portals on these topics. Let’s say in our example it would be € 0.10.
The cost of a Google AdWords ad is the most convenient one for a visitor. You can find out for yourself by logging in to AdWords on the Keyword Planner page. But often this is the most expensive way to attract a new visitor. The calculations will be more realistic if you can find a cheaper way to attract visitors to your domain segment.
Costs of shared web hosting
The cost of attracting one visitor is often calculated in cents. But every penny multiplied by a thousand visitors has a big impact on the overall value. Therefore, I recommend setting the price to the nearest cent, without any “impositions” from the ceiling. If such data do not have them, ask them at any serious advertising or media agency.
Number of visitors
When you pay $ 10,000 for Google AdWords € and you set a maximum cost-per-click of € 0.50, you’ll probably get a little over $ 20,000. visitors. When you buy 100 thousand from Delphi. In an impression position with an average clickthrough rate of 1%, you expect 10,000. visitors. And how many visitors will you get from natural domain traffic?
First, the domain is a long-term, not a short-term, service. How do you know we will get visitors for a whole month, a year or a decade?
I estimate the traffic for the domain for the next 3 years. Of course, most domains will receive visitors in 3 years. But over time, a lot can change.
After placing the exact accounting price on the visitor who will come in 4 years, we will not reach the exact number. Therefore, I suggest calculating a fairly accurate value for the 3 years ahead and keeping in mind that after those 3 years, the flow will be worth “some more”.
Domain traffic trends
Multiplying this month’s traffic from 36 months would be naive. Traffic for most domains varies.
I don’t advise drawing a line for the next 36 months based on changes in visitor traffic over the last few months. Even small deviations in such a long extrapolation will give completely erroneous data.
The magnitude of the change can be either percentage or absolute. The function of variation can be either linear or progressive in any form. To determine this, you will need sufficient knowledge of period attendance statistics and statistics.
Differences between the months of the same year may not mean a change in annual attendance, but only the seasonality of the domain. To understand the real change in the annual traffic of seasonal domains, one needs to compare the same month in different years. Therefore, at least 2 years of traffic statistics will be needed to identify trends in traffic for the seasonal domain.
For example, a seasonal domain receives several hundred visitors each month, and several thousand in December, before Christmas. Traffic in December is higher than in all other months combined. Even if the annual attendance remains stable and I will multiply the attendance in December by 36, I will ask 10 times. If any other month – I won’t see half the annual visitors. Without statistics for at least 24 months of seasonal domain traffic, we won’t be able to identify annual or monthly trends.
12-month statistics may reveal that the domain is not seasonal anyway. Then you will see the same trend in traffic throughout the months. By estimating what features and how much the number of visitors changes each month, you can use this trend to predict all of the next 36 months.
If you do not have sufficient knowledge of statistical theory, I advise you to ask an extrapolation person who understands this. This is exactly what a bachelor’s student who has just completed a course in statistics can do. But if you don’t know what you’re doing, you’ll “get off” and your numbers will be null and void.
Number of future visitors
Easiest when you have 3 or more years of attendance statistics. You can then calculate trends immediately for years instead of months. There will be no need to explain if a domain is seasonal, and predictions will always be more accurate.
Let’s say we have a domain that received 20,000 last year. visitors, and for 3 years in a row, their number has been steadily declining by 20% annually. We expect to receive 16, 12.8, and 10.4 thousand people in the next 3 years. visitors per year. In total – about 45 thousand. visitors in 3 years.
Some domains have absolutely stable or even growing traffic. For domains without websites, this is only possible in very specific situations. You need at least 2-3 years of traffic history to make sure your domain traffic is really stable.
The quality of domain visitors
With the price per visitor and the total number of visitors, you can easily calculate the value of the total traffic. The traffic of visitors to the Paris and Amsterdam domain would be worth 45 thousand. €, mothers – 4.5 thousand. €.
This would be the maximum value if all traffic is of good quality, i. all incoming visitors would like to continue browsing the site. If we have a domain similar to facebook.com and 95% of mothers leave as soon as they see that a non-facebook color site has started loading, then 95% of such traffic is worthless. This reduces our 4.5 thousand. up to € 225.
In our first case, let’s say 20% of visitors expected to see a specific airline’s website. When they see something else, they immediately turn off that page. The remaining 80% read the information on the page, some click on the ads, and so on. Consequently, our 45 thousand. € decreases to 36 thousand. €.
A comparison of these examples shows that the same amount of traffic can be worth both € 36,000.00 and € 225. As with all advertising channels, the value of traffic is determined not by quantity but by quality.
The technical quality setting for unused domains is more subtle than for other websites. Statistical systems to calculate interest and so on. indicators here do not reflect quality. For example, for sites with only one page, the bounce rate will always be 100%. Visitors do not stay on your site and do not go to deeper pages because such pages simply do not exist. Therefore, you need to track external link clicks, time spent on the page, page scrolling up and down, and so on.
Once you link a domain to your site, all the qualities will be clearer. You’ll then be able to segment all visitors by their source and compare how visitors directed from another domain differ from those who came from Google AdWords or clicked on ads on news sites.
If you are interested in purchasing a domain but do not trust the data provided by its owner, rent the domain for a year. In that time, you’ll accumulate enough data to evaluate the true quality of your traffic.
Investment in advertising
Book value and the price paid are different things. We will also incur some costs to get the full purchase value. They lower the price it is worth paying. It also costs money, so when investing far into the future, we want such an investment to cover the cost of capital.
If we can buy identical traffic from an advertising agency by paying monthly, why should we give away our full 3-year advertising budget today? It would only pay off if advertising prices rose for her. Until we have strong arguments as to why this should happen, let’s say ad impression prices remain stable for the next 3 years.
Let’s say the cost of our business capital is 10%. So when we pay for future service, we want at least that amount of discount. According to the DCF formula, 36 thousand. €, distributed over 3 years according to the traffic trend of our analyzed domain, is equal to 25 thousand. € today.
(16 × 0.9 + 12.8 × 0.92 + 10.4 × 0.93) × 0.8 = 25.87968
Popular domains or banners?
Traffic from additional domains will below. Even expensive popular domains, when not in use, usually have just a few dozen visitors a day. But this flow is particularly stable. As a result, tens of thousands of visitors are generated each year. For some businesses, such a slow flow of potential customers is a minus, for others, such a stable flow is a plus.
Given the specifics and seasonality of your business, it’s worth asking yourself whether it’s rational to buy advertising right away for such a long period and lose flexibility. The key factor is whether advertising budget flexibility is relevant to your business. For example, airlines want to fill their flights regularly. The outlet only wants a large flow of visitors when it has received a good shipment.
Stable companies are often already consistently visible in all effective advertising channels. Where to expand then? When switching to other formats, the quality of the audience may decline, so the return on investment will decrease. Domains with quality traffic can then be the best channel to reach a particularly precisely segmented new group of potential customers. We can often compare its effectiveness to Google AdWords or targeted banners.
For small businesses that still have a lot of flexible advertising options, buying domains as advertising is less attractive. For less stable businesses, there is a risk that your business will change dramatically in a year. If you no longer need such traffic, you will have to decide how to use it differently and get a return on your investment. In this case, it is more profitable to rent a domain. It will eliminate most of the risks. The investment will become smaller and more flexible.
A domain is an intangible asset. What is the flow of its visitors is legally and accounting uncertain. Therefore, without analytical calculation, it is difficult to rationally determine its value. It’s even harder to prove it to the buyer or manager. After a quick calculation of the market value, there is no need to prove or argue.
Don’t be shocked that when choosing between similar domains, one is offered for $ 2,000. €, and another for 27 thousand. €. Analytically calculate the values of all options for your business. Maybe the investment in a more expensive domain will pay off in the first few months. Or maybe none of the offers for your company are worth half their price.
In the future, I will write about how to calculate the traffic value of a domain itself, not its traffic. For most domains, it is far more important because only a small percentage of domains have high organic traffic. To learn exactly how to calculate the total market value of a domain, subscribe to the newsletter and wait for new articles.
Choose rationally and work profitably.