Many people use the automated appraisals shown on domain name auction websites as a form of valuation. I don’t always agree with the valuations shown, and I think these tools can be far off in their valuations. You may disagree with me about whether or not auction participants use these appraisals, but I think it’s pretty clear they have an effect on bidding when considering how auctions have changed since GoDaddy and NameJet appended valuations to auction listings.
There is some nuance to using the appraised values though. As I previously shared, a domain name will typically have a higher appraised value when there are multiple extensions registered for that keyword. This appraisal figure may be misleading if the original registrant that let the domain name expire had also registered additional domain names in other extensions. The appraised value may be artificially inflated as a result of the algorithm detecting other registrations.
Bidders who participate in pending delete auctions should be aware that the appraised value of the domain name may decrease after the domain name goes through its deletion cycle and it goes into auction. This happens because the registration date is likely used as a value-setting data point in appraisal algorithms, and the registration date changes on pending delete domain names once they are deleted.
I’ll illustrate this with a hypothetical and fictitious example. Let’s say I want to bid on ElliotsDomainName.com, which was registered in 1995 and is pending delete. When I am looking through my list of prospective purchases in the morning, the domain name has an automated appraisal of $7,505. I backorder the domain name, participate in an auction on DropCatch.com, and I win the auction with a bid of $1,800. When I check my favorite automated appraisal tool a few days later, the value is now $2,505 – a decrease of $5,000.
The likely reason the value changed is because the domain name now has a creation date of 2021 rather than 1995. In reality, the creation date may not matter much to a buyer who wants to own and use the domain name. To an automated appraisal tool, there may be a significant impact on the value based on the creation date of the domain name.
This is an observational finding I have made and not something I rigorously check or care much about. Beyond using the tool to identify domain names that have value in a sea of thousands of expiring domain names each day, appraisals are shown to domain name purchasers at GoDaddy. In fact, the GoDaddy appraisal has been known to influence the messaging on the GoDaddy purchase stream.
While this observation may not matter much to domain investors, it’s something I noticed and keep in mind when bidding on pending delete auctions.