Quinstreet is clear about what it acquired when it bought Insurance.com. It wasn’t just a domain name.
Now the big question, as others are debating right now: How much of this was for the domain name? Was this a domain name purchase at $35.6 million?
The answer to the second question is pretty clear: no. The value wasn’t just in the domain name. On the call, Quinstreet repeatedly referred to the acquisition as a “media asset”, and that was “a web site, media, and technology assets”.
It’s important to understand the history of Insurance.com. It was previously run as an insurance agency, actually selling some policies direct to customers. Quinstreet didn’t buy the agency. Contrary to earlier reports, Quinstreet didn’t layoff anyone because of the acquisition; the report of layoffs was from the owner of the agency, which Quinstreet did not acquire.
Quinstreet usually doesn’t acquire “revenue” in acquisitions. It says it “buys media and then turns it into revenue”. The average cash-on-cash return for acquisitions is 35% at the company. The insurance.com transaction would return 20%-30% on the company’s conservative acquisition model, although Quinstreet says it’s blowing through that number. The acquisition model assumed the loss of a lot of affiliate revenue and leads, but very little of that has been lost.
In fact, in response to an analyst question “aren’t you just buying the domain name”, Quinstreet responded “this is not a domain name”. It wants to build on the existing content and platform.
Bottom line: Quinstreet bought a web site that has a killer domain name associated with it. That killer domain name is one of the reasons Insurance.com is what it is today. But if another site got the same amount and type of traffic, Quinstreet probably would have paid the same thing.