Value in Naïve Appraisal Advice

[DomainMart]

A number of domain name forums, including this one, offer “appraisal by peers” services. Although such advice can be characterized as naïve, it is useful. However, such appraisals are not a substitute for professional appraisal reports.

On the surface, peer appraisal advice sounds biased, as owners of domain names have an incentive to over-state value, while potential buyers prefer a depressed market. Moreover, appraisal postings tend to be few, even when some forums provide incentives to members to post opinions. Under such circumstances, making inferences about statistical characteristics of naïve appraisal data – without making heuristic assumptions about its probability distribution – is futile. Nevertheless, there is experimental evidence that naïve advice is valuable and tends to be followed.

Andrew Schotter has examined experimental evidence and postulates that “subjects learn better when they give advice, and that advice is therefore worth listening to. [Moreover], a person receiving advice must contemplate whether or not to follow it, and this process may also foster learning.” Furthermore, Shcotter adds that “advice tends to be followed, [and] changes behavior.”[1]

I look at the value evidence in naïve appraisals as analogues to stock market analysts’ stock picking. Although there isn’t a consistently superior stock picker,[2] analysts, in aggregate, make the market more informationally efficient.

This efficiency, however, does not imply that naïve advice is a substitute for expert appraisal advice, especially for pricey domain names. Moreover, an experts’ appraisal can provide a sold basis for negotiations between buyers and sellers, as an expert appraisal’s report should point out the sources of value creation and the associated risk. For example, in the art market, which is more subjective than domain names, the evidence suggests that “art experts provide extremely accurate predictions of market prices.”[3]

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[1]Andrew Schotter, “Decision Making with Naïve Advice,” American Economic Review: Papers and Proceedings, 93, 2, May 2003, p. 201.

[2]There may be few exceptions such as Warren Buffet!

[3] Orley Ashenfelter and Karthryn Draddy, “Auctions and the Price of Art,” Journal of Economic Literature, XLI, September 2003, p. 765.


Alex Tajirian

[Edwin]

My experience has been that paid appraisals are no better than free ones. In fact, they're worse since you're out of pocket the appraisal fee!

[Anthony Ng]

I agree with Edwin totally. PAID appraisals are in no way more "professional" than any free, peer appraisals. I guess the bottom line here is: there ain't too many *professionals* in the industry, at least not when compared to the much larger number of forum junkies (me included) here. LOL!

[dcristo]

A domain name is worth what a buyer is willing to pay for it... no more... no less. Paid appraisal services are bollocks.

[fatter]

it is almost impossible to appraisse a domain, because you would have to be a mind reader of what potential endusers might pay,There is one exception 90 percent of domains are worth zero and would be easy to appraisse

[hunnam]

Appraisal by peers is far more trustful than "professional" companys, I have laughed many times at sellers who say this domain is worth XX,XXX as appraised by ???????, no-one should believe them. If you get 3 people who reply to an appraisal thread and they say around the same amount, then thats the amount you will probably get because they are the people who buy and sell domains and are experts. Anyone who uses professional companys might as well use the money for toilet paper.

[Duckinla]

Seems like peer appraisals can go both ways. Sometimes you can get several responses which will hone in on a value range which is probably realistic. Other times there seems to be a "feeding frenzy" of each comment pushing the value higher or lower than the last comment.

[stevo]

A domain name is worth what a buyer is willing to pay for it... no more... no less. Paid appraisal services are bollocks.

I could not have said it better myself. Every week there are reported sales on DNJournal that make me rethink my own valuations. Live and learn.