A Domain name appraisal is an estimate about the potential sales price of a particular Internet domain name. Domain names appraisal is highly speculative. It is an estimate and an opinion, and can considerably vary depending upon the considered elements of the name and its extension. Traffic to and revenue from a web is not relevant to a domain, but to the web content. It is a common mistake to take web traffic and revenue into calculation of a domain. of an individual or a group of individuals that agree about certain elements that constitute the object that they valuate. If there is such an agreement, it is called a standard. That standard stands for the group that created it and for everybody that accepts it. The principle is the same as for any group rule. That You accept the rules or not does not matter: You must behave to them or will You be penalized. Domain sellers usually see a number of things quite differently than buyers. Domain traders tend to accept appraisals by the same people who list their domains for sale, in the idea that the domains will sell more easily. Sometimes, it does work. Sometimes, it does not. There is no way to find out what or how. Valuation by a third party can be a basis for negotiation. However, valuation is not a science but an art. Information about domain value is almost always published by professional domain appraisers. They usually also trade in domains and collect an appraisal fee and a commission upon sales. Appraisers usually price to sell, and rather to reselling merchants than to end users. It may be more conducive to treat an estimate as a price range where there is the best chances of a sale taking place at the maximum value for the seller. Valuation of domain names can be done using several methods. Buyers and sellers, but most often appraisers weigh the following considerations when evaluating a domain name: * The top-level domain extension — .com, .net,.org, .info, .asia, .mobi and so on. ".com" domains are usually considered by domain traders to be the highest valued domain names. * The meaning of the domain name matters to some people, but many webs under a meaningless SLD get traffic because of the content. Domains and webs are different things. * Suitability for commercialization. This is a strictly individual appreciation, because any business can have any name. But is can be true that one name may be more popular than a other. Just as why some stories and songs became popular after the initial title was changed. * Memorability, relative from person to person. A domain should not be more difficult to remember than a phone number or a street address etc. * How many words it is made up off. Anything above three words may be difficult to sell. * Number of searches performed for that word in the last month. Overture.com is often wrongly cited. It is not the domain that pulls in traffic, but web content. There is little reason to believe that an occasional visitor by mistyping would have any interest in the content on a unwanted location. * Length of the domain name may be taken into consideration. Especially long domain names may be tough to sell. This may be correct from the viewpoint of domain traders, but this is definitely not a common argument for end users. Compuserve has both CompuServe.com and cs.com. Commission Junction has CommissionJunction.com and cj.com. The Domain Name After Market (GoDaddy ...) has TheDomainNameAfterMarket.com and TDNAM.com. There are lots of examples that should make clear that domain sellers see a number of things very differently than end users. * Brandability is a valuation parameter based upon the idea that not every word should be equally valable to name a business. However, there are successful businesses with the strangest names. What is said under Suitability for Commercialization applies here too. * Whether it is pronounceable or not — the "phone test" - Tells more about the person who speaks than the name itself. People who cannot pronounce something usually spell it or write it down. * The current position of the market related to that name, as set forth by many appraisers, is really never known. That is, because nobody knows how many people are currently busy trying to get a specific domain or/and web - and with what intention: End User or reseller. * Numbers in the name usually lower estimation (e.g., Loans24.com will probably never sell for as much as Loans.com). * Hyphens do much to damage the value is a popular idea, but true only for merchants and appraisers. End users should not mind about hyphens. * Typographical errors or misspellings greatly reduce the value, although typographical errors of very popular websites can still valued for mis-typed in traffic. For example Digg.com was less valuable than the dictionary word Dig.com, but now typos such as Diggg.com have value for the mistyped traffic. This viewpoint is very relative. * The age of domain name — how long it has been registered is sometimes considered as an indicator of long or early demand for the name, but not for age itself. It could be an indication that there has been more than one different type of content on webs under the domain, and that there was traffic. Very often, some traffic still comes to the latest web under a domain, for various reasons. On the other hand, a domain can be blacklisted because of some content on a former web. * Singular and plural domains may differ in their pricing (e.g.Loan.com or Loans.com) - But both singular and plural can be resold several times for different higher or lower prices, depending on the situation of seller and purchaser. * Traffic means how many times a web page has been displayed in a given period of time. Unless the appraiser has permanent insight upon the traffic statistics about a domain, that appraiser has no idea about the traffic. Because it probably never happens that a company gives such access to the server where the domain is hosted, appraisers depend upon the information released by the domain owner etc. - Usually useless because not verifiable. Traffic to parked pages have very relative value, because the visitors are directed to content that is usually completely modified by the new owner. Above that, a number of visitors will never come there again, because the parked page was not what they were looking for. It should be clear that each and every webmaster must create content that suits as much as possible the reason what people would like to see information about. * Selling price of previous similar domains are very often cited as a very trustworthy reference. Companies keep large databases with selling prices. However, it depends of what people consider to be similar: Length? Language? Age? Numbers? Web content? Formerly offered product? And, if so, what is then relevant and how relevant (important) is it? Is there any guarantee that somebody would pay more or less than the past price? * Fair Market Value is more or less the idea that things can have a standard value that is accepted by most people. Fair Market Value and Market Value are explained elsewhere. A domain (name, address) must be valued separately from the web (content, revenue) for which it is used. The highest prices have usually been paid for the revenue that was generated from the web at the domain's address (URL). The intrinsic value of a domain is the registration fee. There is no such a thing as a current market value for a domain; it just depends on what somebody is willing to pay. The fair market value of a domain can be anything, beginning with the registration fee: The lowest known past selling price, the highest known past selling, price, the most recent selling price, or just any past selling price and any of these (or any sum resp. division etc.) is usually added to the current or expected revenue from the web content (advertising, sales, etc.). Domain (name + ext.) should not be mixed with Web (content + revenue). Domain value estimation by appraisers are always the addition of what they would like that a domain is worth together with the effective/expected/desired revenue from the web content. Some people put value on the length of the SLD (name) and other people prefer description capability, but the shorter an SLD is, the less descriptive it can be. For example ComissionJunction.com is descriptive, but they use CJ.com for shortness. Also, if short is crucial, then the TLD (extension) should be short too. For example, a domain like LL.travel or LL.mobi might not be as good as travel.LL or mobi.LL. This illustrates the relativity of domain value estimation. While the revenue af a web (content) can be easily counted and stated, the intrinsic value of a domain name such as unseemly.com or the shorter seemly.com is a matter of opinions and preferences. In the end, however, any sale depends of the estimates by the domain seller and the domain buyer. What other people think about the price does not affect the sales price. Source : Wikipedia
The web's most comprehensive guide to site valuation is here (it's far better than even the wikipedia entry)