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Why dont you people provide validation for your appraisals?

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  #1  
Old
Temporarily Suspended
 
Join Date: Jan 2003
Location: DC
Posts: 47

Why dont you people provide validation for your appraisals?


I know this topic has been raised by me over and over but nothing seems to have changed. I still see the same assanine appraisals being given...$2, $5, $7, Reg Fee.....They are pathetic. Havent you people noticed a dropoff in popularity of this particular board??? No one posts here anymore, no one responds here anymore...could it be because the lack of credibility of 95% of the people here??? Why dont you people start backing up your appraisals with the reasoning for the particular appraisal. Some of you do, however the majority of you dont.

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  #2  
Old
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Join Date: Sep 2003
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An appraisal is by nature opinion based. What sort of validation could there possibly be?

"I think it should go for the reg fee, because I think it's a crappy domain."

Do you understand what I'm saying?

  #3  
Old
Junior Guru Wannabe
 
Join Date: Sep 2003
Location: Texas
Posts: 65
Validation is possible, but I doubt that the data are available to accomplish a suitable job.


I ran a small businesses appraisal company for years, and have been through the issues of validation many times (especially when testifying as an expert witness on behalf of a partner/spouse when there is a dispute about the value, and one partner gets the business and he other gets cash for his or her share). You have probably heard of real estate appraisers, but unless you've needed one, many folks don't know that there is a whole profession of appraisers for such intangible assets as businesses (separate from their equipment and inventory), tradenames, and so forth, and that such professions have professional certifying bodies and recognized credentials.

In many cases, I had to appraise such intangible assets as tradenames, patents, exclusive territory agreements, and so forth. Never had to do a domain name on the witness stand, but the approach would be the same.

First, any appraisal assumes fully informed and willing buyer and seller, reasonable exposure to the market, and no compulsion on either side.

There are basically three approaches to these appraisals.

The simplest is the replacement cost approach, perhaps modified by the remaining time on the registration, in the case of a domain name.

The second approach relates to the income-producing history of the asset. How much money is actually coming in solely as a result of this asset? Obviously, this requires that there actually be some profits, and that those profit figures are reasonably accurate.

The third approach is statistical. Appraisers and professional appraisal associations all have their own methodology, but these all boil down to a demonstrable value for certain characteristics of the asset.

How can these be used with domain names?

Frankly, the replacement cost approach is just about meaningless in this case. The mere fact that a .com domain name cost $8 to register and a .mx domain costs $125 does, in itself, not make the .com name worth far less than the .mx domain. Further, the fact that both cost $8 to register does not make "yahoo.com" worth the same as "kjh5-gh.com". I doubt that "kjh5-gh.com" could be appraised even at registration cost -- do you think it would bring even 25 cents on eBay?

In the case of a live and profitable website, it might be possible to try to allocate what percentage of the profits were attributable to just the domain name, and this is what I'd have to do in a partnership buy-sell or a divorce appraisal. But this approach doesn't apply in most cases discussed here, as these domains being appraised are almost always unused.

Just as in small businesses (where income figures are often unreliable), the remaining approach is all that is left.

Given sufficient data, the statistically-based appraisal can be pretty reliable. If it is small restaurants, for example, I can tell you that the value is between 25% and 40% of the annual gross sales. Why? Even though every restaurant is different, I know from published figures that 90% of restaurants with sales under $500,000 sold within that range, and most of those sold between 30% and 35% of yearly sales. I'd use lots of other information to determine where within that range I'd appraise the business, but the data tell me that gross sales is by far the most influential factor in the value, despite profitability, value of equipment, location, or anything else.

But that is based on actual data over decades of sales (to account for changes in popularity of restaurants over the years), and thousands of examples with all the figures -- including the eventual sale prices -- available for the analysis.

I have not seen any collections of sales figures for domain names, but they may exist. With such figures, a thorough analysis can determine how much a short name contributes to the value of a domain, or how much a pronouncable name might be worth compared to an otherwise similar domain name. If it can be shown statistically that length of the name, familiarity of the word(s), and so forth are high correlated with the price a domain actually sold for, then the appraiser can use these statistical relationships to assign a value with some degree of confidence.

I suspect, however, that a suitable amount of statistical data is not available to the vast majority of those purporting to appraise domain names, and a lot of "common sense" is used to assign values based on length, generality, and so forth.

Unfortunately, this doesn't always work. Think about that restaurant example. For most people, "common sense" would suggest that a fancy gourmet restaurant would be worth more than an unremarkable working-class diner, when both have the same yearly sales. Common sense would also suggest to many that a lunch-dinner restaurant would be worth more than a breakfast-lunch restaurant.

In fact, the opposite is true, in both cases. But this is only demonstrable by examining a large quantity of actual sales results.

So -- to answer the question -- those appraising domains without data to back up the result are only offering a personal opinion of value. There's certainly nothing wrong with that, but it's not what those in the appraisal business would call an appraisal.

The code of ethics for professional appraisers require that an appraisal be supportable, repeatable, fully explained, and accompanied by a description of the qualifications of the appraiser. I've yet to see that in a domain name appraisal.

Bill


Last edited by webgusto; 09-12-2003 at 06:06 AM.
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  #4  
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iNET Senior Community Advisor
 
Join Date: Jun 2001
Location: Kalamazoo
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Domain appraisal is something relatively new here. Over time, members will become better known for accurate appraisals. I see it as taking some time to attract members to this particular section of the Forums that are knowledgeable in this field.

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  #5  
Old
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Join Date: Jan 2003
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Quote:
Originally posted by Olternit
An appraisal is by nature opinion based. What sort of validation could there possibly be?

"I think it should go for the reg fee, because I think it's a crappy domain."

Do you understand what I'm saying?
Perfect example of why someone like you should not be providing appraisals...as you put it, just my OPINION.

  #6  
Old
Disabled
 
Join Date: Sep 2003
Posts: 78
Quote:
Originally posted by WebService
Perfect example of why someone like you should not be providing appraisals...as you put it, just my OPINION.
No, actually not. More of a perfect example of how it works here at WHT for the most part. But, thanks anyway.

  #7  
Old
Junior Guru Wannabe
 
Join Date: Sep 2003
Location: Texas
Posts: 65
Notwithstanding what I wrote above, no one should expect a real appraisal for free or even for cheap.

If you want a domain name value for free, the responses I've seen here are as good as I'd expect you'll get.

Bill

  #8  
Old
Web Hosting Master
 
Join Date: Jun 2003
Posts: 566
This part of the forum is best to push up your posts! Its easy to type $0, nil or reg fee...

I think there should be a rule (to make this part much better) that with each post, minimum 2 lines should be posted to justify the appraisal! No matter what value is posted (it can be $0 also)

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  #9  
Old
Web Hosting Master
 
Join Date: Mar 2002
Location: Orlando, FL
Posts: 12,183
Appraisal is based on experience and knowledge of the current domain reselling market. If a domain is worth zero, getting all frustrated over it will not increase its value.

  #10  
Old
Web Hosting Master
 
Join Date: Jun 2003
Posts: 566
If its $0 then no harm in putting $0... but it will be better if 2 lines of some details are put along... it will help our friend who has come to this forum for appraisal. And it will show how seriously we thought of his domain and gave an opinion... just what I think!

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