Domain Appraising Part II - The Road To Standardization

So ideally, appraisal firms should share their sales databases. More realistically, new firms will appear specializing in collecting, storing and selling domain sales information.

2. Use Real Appraisers

There is an obvious economic temptation to minimize the use of people in the appraisal process and maximize the use of appraisal 'algorithms'. Some appraisal firms might even believe that they can do appraisals 100% without human intervention and consider this goal the holy grail of domain appraising.

In this author's opinion, appraising domain names will always be a job for humans, with just a supporting role for technology. Domain names are examples of 'natural language'. No computer algorithm has ever come close to understanding natural language and its infinite subtleties. In the main, any attempt to replace people with programs will lead to highly inaccurate and sometimes embarrassing valuations.

3. Use Qualified Appraisers

Just as art appraisers specialize in valuing works from certain painters, styles, or periods, so appraisers should consider specializing in categories, be it finance, sports, entertainment, or whatever. Ideally, they should have some professional qualifications or at least some real experience in the fields in which they specialize.

Also, what about all the different domains? We already have the three top-level domains, .com, .net, .org, plus the adopted global TLDs, such as .TV, .cc, .fm, .am, .to, .ws, not to mention the country domains. Can any single appraiser expect to know the value of all these different domain markets? Probably not. Again, some degree of specialization looks to be the appropriate answer.

4. Be Neutral

It should be obvious that appraisal firms should aim to be a neutral party sitting between buyers and sellers. But in today's market is this really the case? Many appraisal firms have been set up by domain speculators and brokers who tend to have a financial interest in maximizing sales figures. For instance, if a domain broker makes 10% on all domain sales and acts as a domain appraiser, it seems fairly obvious that they have a vested interest in appraising names as highly as possible.

5. Form an industry body to set up and police standards

Without an industry body, any drive to standardization is doomed to failure. It is in the best interest of the appraisal firms, particularly the smaller ones, to get together and create a non-profit organization, whose job would be to work out a code of practice for members. In return, members would be able to display a special logo on their site.

Conclusion

All industries develop standards as they mature. The question is this: From where do these standards come? If no attempt is made to create a common set of standards, then 'de facto' standards will rule, which will naturally come from the few big domain appraisal companies. If the smaller appraisal firms want to be part of the process of defining how domain names are to be appraised, they need to get together and form an organization and really work towards implementing the ideas.