Domain-Name Appraisals Go Beyond Value Revelation

The different situations where a domain-name appraisal becomes valuable information, aside from revealing its fair market value.

Berkeley, CA (PRWEB) May 15, 2004 ---A domain-name appraisal provides value-added information beyond the fair market value of a domain name. It identifies the best exchange venue, reveals taxable obligations, and determines the reserve price, according to a report published today by DomainMart.

Before you purchase or sell your car, you try to find its Blue Book value, the worth of comparable models, and the best transaction venue (online, a dealer, a newspaper); you also investigate alternatives to purchasing (such as leasing) or to selling (such as donating to a charitable organization). When acquiring or selling domain names, shouldnt you do the same?" suggests Alex Tajirian, President and CEO of DomainMart.

A person who is interested in acquiring the additional cash flow that the control of a domain name may generate has two options: to purchase the domain name or to lease it. On the other hand, a domain-name owner has to find the highest value among selling, leasing, donating to a charitable organization, or keeping his intangible asset.

Buyers and sellers of domain names should know the value of a domain name not only as a fair benchmark for an exchange, but also as a barometer to determine the best type of auction to use," says Tajirian.

Below are the different situations where a domain-name appraisal becomes valuable information, aside from revealing its fair market value.

(1)   Buying
a.   Determining Reserve Price: A buyer should acquire an asset only if the value of its expected future benefits is greater than its acquisition price, i.e., if the acquisitions Net Present Value (NPV) is positive. Thus, a buyer needs to establish the reserve price (the maximum price) she should pay to acquire a domain name and therefore needs to obtain an estimate of its fair market value. The value of expected benefits is largely driven by how the domain name will be used and thus varies with each buyer.

b.   Assessing Tax Impact: When domain names are part of a portfolio of assets obtained through a merger or an acquisition, the acquiring company needs to value each of the assets in the portfolio, so as to determine the correct accounting amortization amount. Although there are no explicit amortization standards for a domain name, it is typically treated as an intangible asset.

(2)   Selling
a.   Determining Reserve Price: One would sell an asset only if the sale price is greater than the value of its expected future benefits to the owner, i.e., if the sale results in a positive NPV opportunity to the seller. Thus, obtaining an estimate of the value of its benefits or its fair market price is required to establish the reserve price, the minimum price at which the seller should relinquish a domain name.

b.   Determining Auction Type: The best type of auction to use in the sale of a domain name depends on what bidders perceive its value to be. A seller can use the difference between the pre-appraised perceived value and the appraised value as an indication of whether potential bidders are expected to over- or underestimate each others bids. If, for example, a seller expects bidders to overestimate each others maximum bid, the domain name should be sold through a sealed-bid auction.

(3)   Leasing
To determine a lease rate, one must first establish the value of the domain.

(4)   Making Charitable Donation
An appraisal report from a reputable domain-name appraiser serves as a certificate for tax-deduction claims.

(5)   Liquidating
This option is typically associated with involuntary sale due to, for example, a court order. Although the appraised worth represents a fair market value, liquidating is different from selling voluntarily, as such a transaction involves relinquishing an asset under financial duress.

About DomainMart:
DomainMart is a leader in providing domain-name secondary-market services, including appraisal/valuation, auction, escrow and ownership transfer, leasing, parking, management, and protection since 1996.

For more information, please visit http://www.DomainMart.com or contact:

Tom Saito, Marketing Specialist
DomainMart Inc.
TomSaito@DomainMart.com
Tel: +1 (415) 905-4234