DomainMart Outlines Porter’s 5-Forces in Valuing Domain Names

DomainMart, a leading provider of quantitative and analytical domain-name services, outlined today the use of Porter’s Five Forces competitive strategy framework in domain name valuation. One of the methodologies used in domain name valuations is the discounted cash flow (DCF) approach. In addition, a strategic modeling approach, such as Porter’s five forces, must be adopted to analyze the demand for the domain name.

Berkeley, CA (PRWEB) October 17, 2005 – DomainMart, a leading provider of quantitative and analytical domain-name services, outlined today the use of Porter’s Five Forces competitive strategy framework in domain name valuation.

“Strategy and valuation go hand in hand,” says Alex Tajirian, DomainMart CEO. “You cannot do valuations without competitive analysis and you cannot choose your best strategy move without valuation,” adds Tajirian.

A widely used methodology to analyze the attractiveness of an industry is Porter’s Five Forces framework. The five forces are: (1) Intensity of Rivalry among Existing Firms; (2) Bargaining Power of Buyer; (3) Bargaining Power of Seller: (4) Threat of Substitute Products and Services; and (5) Potential Entrants.

Besides the above five forces, sometimes the government is added as a sixth force. For example, the U.S. government exerts influence on the domain name industry directly through legislation and indirectly through the Internet Corporation for Assigned Names and Numbers (ICANN), the Internet's governing body.

The fist step in implementing a strategy framework is to define the relevant market. The boundaries of the market are not always well marked, which makes the task more challenging, yet insightful and thought provoking as to what the relevant competitive forces are.

The attractiveness of an industry is measured in terms of excess returns, not just industry growth rates. For a domain name, the attractiveness is measured in terms of additional shareholder value the acquisition of the domain name would create. The growth rate in the additional CFs, in turn, depends on future growth rate of Internet use, sources of traffic, industry growth rate, and inflation rate.

About DomainMart:
DomainMart is an industry leader in providing domain-name secondary-market products and consulting services, including appraisal, escrow, private investment management accounts, protection, valuation, and parking traffic monetization management since 1996.

For more information, please visit: http://www.domainmart.com/news/Porter_5_forces.pdf

Contact:
Tom Saitori, Marketing Specialist
DomainMart
e-mail: TomSaitori@domainmart.com
Tel: +1 (415) 905-4234

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