One thing I've discussed with colleagues is actually educating potential buyers. I think if domain sellers/investors start talking about domains as assets vs. simple "marketing" tools the better off they'll be. They really need to understand they will be buying the best kind of targetted traffic there is.
A very effective method is the comparable method. This is a short version of a valuation method I've been working on similar to the comparable method for companies:
1) Find out which keywords the domain you want to pitch ranks for. You can use the google webmaster tool, semrush or keyword spy.
2) Record the search engine position of those words using above tools
3) Find out the monthly search volume for each keyword
4) Find the Adwords CPC for those words (if you want to do alot of work you can find out what the broad, exact and phrase match bids, but stick with whatever gives the highest cpc)
Your Organic Ranking value will be:
CPC x no. of clicks
Now you will need to adjust the no. of clicks by what position those words are within the top 10-20.
Use the aol leaked stats that you can read about on SEOBook or Jim Boykin's blog (and discussed here):
How Much Money is a Top Google Ranking Worth to Your Business?
Assume if you are in position 1 you get 42.13% of the searches, position 2 11.9%, etc.
Also, important to note that whatever monthly search volume you get, discount it by 30%. In other words, the organic results get about 70% of the traffic.
So let's say you are ranking #1 for a keyword with 5,000/month.
First calculation:
5,000 X 70% = X [no. of searches for organic listings]
Second Calculation:
X*42.13% = Y [no. of organic "clicks" for position one.]
($CPC of that word) (Y) = comparable equivalent of that word.
In other words, if the company in question had to pay for "equivalent" or "comparable" traffic on the page listings on that word, that's what it would cost them.
You must do this for all the ranked words if you really want to get it right (not that hard - calculate the value out to a given time period, say 1 years, 2 years, 5 years, etc)
If you are ranking for some high cpc keywords, you have tangible evidence to support your claim of the domain's value - in other words, with that domain they are getting traffic that has an exact market value and you've demonstrated it to them by these figures.
If they are knowledgeable they might go into whether or not organic traffic converts as well as ppc traffic but Aaron Wall addresses this and you can quote those stats as well.....
The next thing to do is demonstrate to them that with the domain they are investing in, they are building equity just as one does when one rents vs. buys.
In other words, with the ppc traffic, once the checks stop rolling to google, the clicks stop-a-comin'. However, once they acquire the domain, not only do they get the same number of clicks as with paid traffic (from the point of acquisition on), once the investment is paid off, they are entitled to the same no. of clicks - forever (assuming all things being equal).
If you really, really want to provide more evidence, you can also demonstrate how the relevant domain will lower their ppc costs and make them more competitive relative to their peers.
You could set up a ppc campaign and hold all things equal, save the domain. If the higher relevance score with your domain produces substantially lower avg. ppc costs, you can show them that as well.
The problem with domains, like most alternative assets is that there's alot of imperfect information and thus valuation is difficult. And those that have developed their own valuation models aren't about to share it all.
Of course you could do more but there definitely some meat above.....
Lastly, buydomains.com has a nice little "educate the buyer" pdf you may want to take a look at
