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WEST PALM BEACH, FL – I recently tested a domain name valuation tool powered by artificial intelligence, and I was struck by how inflated the appraisals were. The estimated values seemed wildly generous—far beyond what the current market would realistically support. It reminded me of a time, 10 to 15 years ago, when domains were often priced based on hypothetical potential rather than actual sales data or revenue performance.
It seems like the prices are based more on theoretical potential rather than grounded, market-based valuation. While I would love for some of my domains to be worth with these tools suggest they are, it’s just not realistic.
Here is what is likely going on:
1. AI Valuation Tools Prioritize Semantic and Brand Potential
Modern AI-driven domain appraisal tools rely on large language models that:
- Understand word relationships and market buzzwords.
- Favor short, pronounceable, brandable names.
- Overweigh factors like industry potential or future utility (e.g., “this would be perfect for a fintech startup”).
This often mirrors how domains were priced in the mid-2000s—valuing “what it could be worth to the right buyer” rather than what similar domains have actually sold for.
2. Less Weight on Comparable Sales (Comps)
Unlike traditional valuation models that heavily weigh historical domain sales (from platforms like NameBio), some AI tools may use predictive modeling rather than factual, recent sales data. As a result, they:
- Inflate valuations on hype-heavy terms (AI, crypto, green energy).
- Assume end-user interest without factoring in liquidity or demand in the reseller market.
3. Return of the “Potential Value Fallacy”
Back in the late 1990s and early 2000s, domain investors often priced domains based on what a business could make using the domain, even if no one had ever paid those numbers before. AI-generated appraisals seem to be reviving this trend—projecting hypothetical business scenarios and pricing accordingly.
In reality:
- Buyers care about comps—real, recent sales for similar names.
- Liquidity matters—a domain is only worth what someone will actually pay.
- Most domains sell for $100–$2,500—even many solid two-word .coms fall in this range unless they’re ultra-premium.
AI valuation tools are a great starting point, especially for identifying potential branding strength—but they should be taken with caution. If you’re buying, selling, or investing in domains, pairing AI estimates with historical comps, keyword value, and industry trends gives a more balanced and realisticview.
About The Author: John Colascione is Chief Executive Officer of Internet Marketing Services Inc. He specializes in Website Monetization, is a Google AdWords Certified Professional, authored a ‘how to’ book called ”Mastering Your Website‘, and is a key player in several Internet related businesses through his search engine strategy brand Searchen Networks®
The issue was is and will likely remain that the domain industry failed to create asset classes.
Countless, clueless, commodities investors disguised as domain investors hoar themselves daily then post to Twitter to apologize for their obvious error of under selling their domains
While it is true that some AI valuations may over inflate domain value it is equally true that .10 Harry sales have skewed historical sales so much so that using either method may not provide any reliable measure of help as it pertains to domain valuation.
instead of using predictive analytics or skewed historical sales data I suggest and my agency uses historical industry data to price domain assets.
The principal for my decision began years ago when I learned that clients in the industry my business served used a formula of percent of revenue to determine their marketing budget.
My business uses a percent of revenue model to determine BIN price but also provides a Make Offer option for buyers.
industries from finance to automotive to retail get it. They clearly separate asset classes by value.
Applying this simple logic would create the biggest enhancement to domain investing and in fact the domain industry in decades. And would serve to bolster the value of domains as an asset class. And help the reputation of domain investors by separating committed investors from fly-by-night commodities investors.
You’re the clueless one who doesn’t know what he’s talking about.
“Buyers care about comps—real, recent sales for similar names.”
How stupid does it get? Perpetuating the “residential real estate” fallacy, which it seemed people were finally over. Who knew anyone was still capable of that?
With advanced AI this is the first time such technology is actually being HONEST about specific domain names, instead of having to deal with the effects of Estibot, GoDaddy or some other “appraisal” software declaring your 6 and 7 figure domain is only worth 3 or 4 figures, occasionally 5.
And I’m not even a “domainer” any more, but 99% end user buyer.
I would add some “profanity,” which would be appropriate, but you get the point.
Appreciate the passion, but I stand by the point: market value is what someone has actually paid – comps aren’t perfect, but they’re the closest thing we have to reality. AI valuations are exciting, but calling them ‘honest’ doesn’t make them accurate. Most end users don’t cut 6-figure checks based on potential—they buy based on need, budget, and precedent. Sure you might get the occasional oddball here and there, but for the most part, buyers want to make smart purchase decisions and looking at actual recent sales is the right way to go. Even looking at the big sales that took place 20 years ago don’t really apply to today much to do with the changing landscape we’ve seen over the last decade. 10 or even 15 years ago an exact match domain was like holding a winning lotto ticket but today, it’s just an unscratched ticket among 1000 others.