Some up, some down, but enthusiasm for domain name companies remains high.
Ask any domainer and he will tell you the domain name market was up in 2006. But the same can’t be said for all of the companies catering to this space. Here’s a lowdown on how companies that make money from the domain name industry fared in 2006.
Marchex (NASDAQ: MCHX) – Marchex opened the year at $22.41 and closed at $13.38 per share, losing over 40% of its market value along the way. According to the Seattle Post-Intelligencer:
Seattle’s Marchex Inc. saw its market value drop 41 percent to $524 million. The company matches advertisements with relevant Web sites, which helps content publishers make money from Web hits by driving traffic to merchants’ sites. It launched an advertising network of more than 200,000 domain names in November, but domain name trade publications have said that some of the sites may infringe on trademarks.
Marchex definitely has some skeletons in its closet. It has been slow to monetize its domains and has a number of neglected assets. But the biggest problem may lie in domain names it owns that infringe on major companies’ trademarks.
Google (NASDAQ: GOOG) – Google has done more to spur the current domain name boom than any other company because of its advertising platform. The stock closed Friday at $460.48 giving the company a massive market cap of $140.98B. Will Google’s fortunes last? The company will definitely slow down over time. But when will this happen? One of the potential downfalls of Google is its lack of transparency to its customers. It’s one thing for Google to keep its search algorithms under wraps. But advertisers are getting frustrated with the constant changes to its Adwords program. It used to be fairly simple: your position on a page was determined by your ad’s click-through rate and your bid. But now Google has added a number of other measures to make it impossible to understand how your ad is ranked. Among the changes is a quality score for your landing page. Google doesn’t tell you much about what makes a good landing page. It seems arbitrary to advertisers, and advertisers are the ones creating Google’s massive market cap. In December 2005 I spent over $5,000 on Google Adwords. In December 2006 I spent only $1,000. It’s not because I don’t want the traffic. On the contrary, I wish Google would deliver $10,000 worth of traffic to me every month. But I’m beginning to think that Google doesn’t want my business. Microsoft does, however. The company launched its new advertising service and this December I spent over $3,000 with MSN. MSN’s system is much more transparent and user friendly.
Communicate.com (OTCBB – CMNN.ob) – Communicate.com owns a number of premium domain names and monetizes many of them by creating real web sites, such as Importers.com and Perfume.com. Communicate.com’s e-commerce stores don’t carry inventory so they carry little risk. The company’s stock opened and closed the year at $1.35 per share but it was a wild ride for shareholders. The stock bottomed out at $.65 intraday on July 17. The good news is that investors who got in around that time saw their position double by the end of the year.
The company currently has a market cap of $24M. Parking revenue fell for the company for a couple reasons: First, it removed Body.com from its parking network to launch it as a site (that’s good news), Second, they saw parking revenue on their existing portfolio fall (that’s bad news).
You can see a list of the company’s domains here. Personally, I’m most excited about Cricket.com. Cricket is an extremely popular worldwide sport, and there’s also potential to sell the domain to a certain wireless company. (Incidentally, type CricketWireless.com into your browser and you’ll see a site monetized by Marchex. Hence, Marchex’s trademark problems referenced above).
On the domain sales front, I sometimes think Communicate.com sells its domains for too low a price. But the company does a good job investing the proceeds.
Tucows (AMEX: TCX) – The domain registrar and software company started the year at $.88 per share and finished at $.85, ending with a market cap just shy of $65M. Tucows has a large network of domain name resellers, but some of them aren’t high quality service providers. Tucows is currently the fourth largest register in terms of domains under management (5.49M) according to RegistrarStats.com.
InterSearch Group, Inc. (AMEX: IGO) – InterSearch Group owns parking company ParkingDots and owns valuable domains such as IRS.com. Its shares made the move up from the Pink Sheets this year. Its 52-week range is $1.80-$3.18 and closed the year at $2.35 per share. That gives it a market cap just shy of $60M and a PE of 34. InterSearch has been on an acquisition spree for high end domains. The company paid $10M+ to acquire IRS.com which went live before the last tax season. The company’s ParkingDots program offers up to a 100% revenue payout in an effort to evaluate domains for purchase.
Dark Blue Sea (ASX: DBS) – Dark Blue Sea, owners of Fabulous, received a takeover bid for 65 cents (Australian) in December. The acquiring company is Photon Group Limited (ASX:PGA). It’s not clear if the deal will go through. The company traded at .725 as of the end of the year.
Yahoo (NASDAQ: YHOO) – Media company Yahoo offers domain registrations, but its big play in domain names is providing pay-per-click ads on parked pages through partners like ParkingDots (see InterSearch Group, Inc. above). 2006 hasn’t been a good year for Yahoo. Its shares finished the year dow 36% to $25.54. Advertising is Yahoo’s number one source of revenue and its pay-per-click platform has lagged Google’s. You can blame being first to market for that. Yahoo’s platform is that of pay-per-click pioneer GoTo. Among the limitations of the GoTo system are separate accounts for each country you advertise in, separate ads for each keyword, and a slow backend. Thankfully Yahoo is addressing the issues with its so-called “Panama” update. I’ve already upgraded my paid search account and it’s miles ahead of the old platform. We’ll see if Yahoo is able to turn it around in 2007.
GoDaddy – I had hoped to write about GoDaddy’s stock by now, but the company pulled its IPO earlier this year. Perhaps the company will go public in the future. If not, we might see companies such as Demand Media traded on the public markets.
What will happen to these domain name companies in 2007? Domain Name Wire will continue to provide coverage of these companies over the coming year.