Annual domain study sheds light on company’s prominence in domain market.
We know Sedo is a behemoth in the domain industry. But just how big is it and what is the company worth? Sedo’s latest domain market study, along with majority owner AdLINK’s financial reports, sheds some light.
AdLINK currently owns 75.94% of Sedo. It purchased 52.14% of the company in 2005 for EUR 14.031M, giving the company a pre-money valuation of approximately EUR 28M at the time. A year later in November 2006 AdLINK acquired an additional stake, bringing its share from 52.14% to 75.94%. The purchase price was EUR 34.5M, giving the company a pre-money valuation of about EUR 145M pre-money.
Now lets back into Sedo’s growth numbers since November 2006. I reviewed AdLINK’s 9 month report that included numbers from September 30, 2006. The numbers show:
-5.65M domains parked at Sedo
-2.15M domains available for sale
-395,000 registered users
-EUR 29.4M sales for three quarters ended Sept 30, 2006
Since this is about the time of the acquisition of approximately 25% of the company for EUR 34.5M, this is a good starting point for determining the current value of the company.
Here are the stats 1 year later for the three quarters ended November 2007:
-8.9M domains parked
-4.2M domains available for sale
-EUR 44.8M revenue
Sedo’s new annual domain report show the following stats for 2007:
-$72.2M (EUR 49.8M) domains sold in 2007, up from $45.1M in 2006
-Paid $50M (EUR 34.5M) to parking customers in 2007. If the company pays 50%, this means Sedo earned $50M in revenue from parking last year
-Now has 10.5M domains listed for sale. This seems to jive with the “domains parked” numbers in AdLINK’s reports.
-600,000 registered users
If we assume EUR 34.5M in domain parking profit and the company earned a 10% commission on domain sales (about EUR 5M), that gets to EUR 40M revenue for the year. That’s obviously too low given the November 2007 stats. So Sedo is either making a higher average commission, a higher cut of parking revenue, or bringing in revenue from other sources such as webhosting affiliate relationships.
Regardless, let’s assume revenue of EUR 60M-65M for 2007. Revenue is up about 50% from the prior year. If margins stay the same, this would potentially indicate a 50% increase in valuation, assuming solid growth forecasts.
It’s clearly hard to value a company like this, but I’d put the nut at about EUR 250M, or roughly $350M USD.
Compare this to the $3.726M NameMedia paid for Afternic in 2006.
Now, it’s been a while since I graduated with my finance degree. It’s also been a while since I’ve done company valuation. So take a look at my numbers and let me know if I’m missing something.
But regardless, Sedo can be considered a huge success story in the domain industry.
graham says
From a valuation point of view, the revenue stream is only one part of the equation. Ultimately the value of a company is based on the cash flow it can generate going forward discounted for a “risk premium”.
In other words, the cash flowing from the business (at it´s simplest revenue – costs) and in particular the growth forecast is what drives value.
I would be surprised if Sedo´s PPC share was as high as 50% with so much competition in the market and new companies springing up all the time. What is clear is that this valuation would be contingent on maintaining a high growth rate although as with all markets that eventually mature, this growth will decline.
I do think that what they have done with GreatDomains will prove / has proved to be a great investment.
Andrew says
Graham, you’d be surprised what domain parking companies are able to keep. Some of the biggest ones get a greater revenue share from Google/Yahoo, which let’s them keep a greater amount too.