Article features NameMedia, parent company of BuyDomains.
“THINK you have a good handle on the Internet economy? Try this one. What Internet business has raised $120 million in financing in the last year, owns 725,000 Web sites, and has as its chief executive the former head of Primedia and International Data Group?” asks an article in today’s New York Times.
The answer is NameMedia, the domain name holding company that also owns domain resellers BuyDomains and Afternic. Unlike many recent articles in the mainstream press about domain names, this article does a good job distinguishing between cybersquatting and legitimate domain investing:
The business is a far cry from the days of cybersquatting, where speculators bought up names of businesses to which they had no legitimate claim, but it does represent a vindication of sorts for many who bought hundreds or thousands of random Web address names on the hope that one day they would be worth something.
The article quotes analysts that say NameMedia and its competitors could represent the next wave of IPOs.
My question remains…why should companies like this go public? There are a couple reasons. One is to return capital to investors through a liquidity event. The other is if the money will be reinvested in developing thousands of web sites. With investors in for over $100M, these companies need to grab a very rich valuation to justify the big investments. That may not be hard, given that some of these companies have been buying domainers’ portfolios for as little as 5x annual revenue. Public companies can command 20x annual revenue or more.
But if these companies didn’t have investors looking to cash out in liquidity events, would they ever think about going public? Why not just let the cash flow roll in year after year? (It’s worth noting that many of these investors can’t take dividends because of their charters and limited partners.)