Domain parking companies must start acquiring domain portfolios — or get out of the business.
A little over two months ago Oversee.net, parent of domain parking goliath DomainSponsor, announced that it acquired a portfolio of 35,000 domains. The company said is was gearing up to acquire even more domain portfolios. Perhaps DomainSponsor has realized that it can’t stay in the business of servicing other peoples’ portfolios forever — it must own the domains to guarantee future income.
Consider this. You have a portfolio of a few thousand domains that generates $10,000 per month in parking revenue. Then, suddenly, the spigot is turned off. Your revenue drops to $0.
This scenario is exactly what’s happening to domain parking companies. Their best customers are selling their portfolios to the industry’s domain portfolio consolidators, such as iREIT. One day the parking company has a good customer bringing in thousands each week; the next day that revenue is gone.
As portfolio consolidation continues, domain parking companies must take control of their own futures by owning the domains. Don’t get me wrong — there’s still a lot of money to be made in helping others monetize their domains. But the big domainers that generate the bulk of the revenue are the most likely to sell their portfolios. When the portfolio is sold, all of the domains are transferred away from the parking company and into the consolidator’s own parking system.
InterSearch Group is another company that gets it. The company realizes that the data it gets from parking other people’s domains is rich and valuable. In fact, most domain parking companies know more about the traffic coming to domains than the domain owners do. InterSearch runs ParkingDots, and offers an 80%-100% revenue share. The company hopes to purchase high quality domains that are parked with its service. In May, ParkingDots announced it was launching a multi-million dollar fund to purchase domain names. And the company means business. InterSearch spent over $10M to acquire IRS.com.
NameDrive is also focusing on acquiring domains for itself and select partners. Its “Park and Sell” program lets customers park domains for a month and sell for a multiple of the revenue. NameDrive isn’t inviting new buyers into its program, perhaps because the company wants first crack at your domain portfolio.
What can domain parking companies do to stop losing large portfolios? They don’t necessarily have to shell out the cash today to buy portfolios. They can create “first right of refusal” agreements with their customers. In exchange for offering a slightly higher revenue share, the domain name owner agrees to give the parking company the opportunity to make a bid on his portfolio should he receive an offer to sell. This is a win-win for both the parking company and the domainer.
It will be interesting to see where the domain portfolio acquisition business is one year from now. Large portfolio aggregators are paying fairly low multiples for domains right now because they’re the only ones who can shell out millions for a portfolio. As more companies get into the game, look for portfolio multiples to increase.
geoffgo says
The problem with right-of-first-refusal is they are the kiss of death. If the seller doesn’t inform the bidder that there’s RoFR, the buyer will be perturbed, when they find out they ‘ve been outbid. If the RoFR can outbid the buyer, it ends up a no win.
Editor says
I don’t see it as a no-win…it seems the seller would certainly win.