Company values retail value of portfolio at approximately $1,000 USD per domain.
A Dark Blue Sea investor presentation (pdf) suggests that the retail value of its 570,000 domain portfolio is about $600 million. The presentation also provides a wealth of other statistics and details on its deal with domain registrar GoDaddy.
Dark Blue Sea, an Australian company, is well known to domain name investors for its Fabulous domain registrar and domain parking services.
As of the end of 2007, approximately 152,000 of the company’s domain names were profitable, meaning they eclipsed the $6.42 wholesale price of domain registration. The company estimates the average retail value of its domains to be $1,000, and also predicts that GoDaddy will help it sell 45,000 domains over the coming five years. Dark Blue Sea inked a partnership with GoDaddy earlier this year that involves a commission and options for 7% of Dark Blue Sea. The options vest according to the number of sales GoDaddy generates, which incentivizes the company to make sales. Overall, Dark Blue Sea expects $25 million to $30 million in profit from the GoDaddy deal over the next five years.
So if only a quarter of Dark Blue Sea’s domain names are profitable from pay-per-click revenue, where is the value? The company points to the retail market, where domain purchase prices have little connection to PPC multiples. For example, here are some domains the company has sold, the sales price, 12 months trailing revenue, and the implied revenue multiple:
MagazineReviews.com – $1,200 – $2.28 – 527x
CollegeInvestment.com – $2,650 – $32.08 – 83x
UraniumOxide.com – $830 – $.69 – 1197x
MexicanStocks.com – $800 – $.76 – 1058x
ArtBlankets.com – $1,200 – $.33 – 3663x
Another company that focuses on retail sales is NameMedia, which owns domain name aftermarket Afternic and sales platform BuyDomains. NameMedia says the “sweet spot” for small and medium business domain name sales is between $2,000 and $5,000.
Jeff says
The problem with that $600 million dollar valuation is that all the company’s stock is only worth about 1/10 of that. Obviously, the market is not evaluating the portfolio the way that Dark Blue Sea does. It sounds to me like a “pie in the sky” evaluation.
Andrew says
@ Jeff-
The difference is that it’s not a liquidation value. They acknowledge they can only sell domains at this average value over time.
Damir says
Nice post about the estimated $ value of the domain name portfolio of Dark Blue Sea.
Lda says
Whether it’s $600M or $60M, if companies like Micro$oft decide to chase control of traffic by buying portfolios, (as would seem a logical next step for them vs. Google), buying Dark Blue sea would hardly touch their petty cash box. Even at $600M.
Zorro says
This is simply hot air..
jack says
Give me a break. Most of their stuff is junk.
Would of could of should of. Yea if they find 600,000 suckers they are worth that. Unlikely though.
Rob Sequin says
That could very well be their retail value meaning it takes a lot of time to sell all those domains to end users.
Should they need to liquidate quickly the valuation would fall substantially and that’s the case for just about anybody’s portfolio.
Andrew says
@ Rob – that’s correct. They figure they’ll sell about 1.6% each year through GoDaddy. Figure another 1/2 point through other venues. At that rate it would take about 50 years to sell them all.
ASN5 says
On that scale, it’s almost like buying a lotto ticket. With 570,000 domain names, I would think they were lucky to have broken the 25% mark in profitable click domains.
It certainly does add meat to my assertions that buying domain names based on click earnings is a bad joke on domain name owners.
And almost as important is what you didn’t mention: they acquired their domain names directly from the registry or (taking a page from Michael Mann’s play book) captured the expiring domain names of their registrar customers.
The point being, if only one in four of THEIR domains will pay for itself, then you can imagine how hard it would be to ever make click profit from a domain name purchased in the aftermarket. Without end user sales, domain names start to look like FEMA trailers rotting in a lot somewhere.
While you may or may not eventually hit the lotto with a nonsense name that someone wants for a meaningless brand, I would limit those holding to 10 – 15% of a portfolio. The far better bet is a name that has a clear underlying business use.
From my present experience, I can tell you that the mega companies out there have (until recently) spent little or no time in thinking about (let alone building) a retail sales network. This is akin to GM building cars without setting up a dealership network.
I say this because, as you know, a dealership will always buy a good car. Maybe not at the price you’d like, but they will buy it because they know that – whether through a retail sale or a dealer auction – they can sell it.
This is exactly why I attempted to convince the AAAA to develop a domain name marketplace.
I can also tell you that in the past month every major player and mega company with a telephone or valid email address has been contacted regarding the domain name portfolio I have been trying to sell in order to fund an investor-focused registrar. And even though the per-domain cost of the portfolio has dropped to only $844, it still sits there – even though it included a country name (which sold last week for only $40K).
It was amazing that some of the folks contacted are STILL asking about click income. Others that know better recognized the handpicked nature of the portfolio, but seemed almost apologetic.
This tells me that (a) some of these companies still don’t get what’s happening, and; (b) others are just realizing the problem with not have a retail network.
I expect there is now a laser focus on developing retail sales networks, and I don’t mean the almost retarded number of auctions available today.
What I’m talking about is the development of “dealerships” that accept only the best domain names in the most common industries. I expect that should they materialize, they will require exclusive placement for reasonable periods (much like real estate brokers require a 6-month or one-year listings).
If this does occur, I will rejoice, as we will undoubtedly be one step closer to a central listing system like the MLS for real estate. And when domain name owners can list their domain name with any broker and know that any other broker can share in the commissions if they find a buyer, then we will have arrived.
Hosting Plans says
Domaineers with huge portfolios do not or cannot invest into developing all of them into websites. They simply hold thousands of domain names with PPC ads. And they want to add as many domains as possible. To ask about the click value or revenues before buying a domain name as even today we can find several websites / domain names being owned by hobbyists with a profit motive.
When we owned thousands of domain names, what we look for when buying domains is type-in traffic or short names. All other domain names doesnt appeal, no matter how well they
are formed. Thats the problem with huge portfolios. And when we have lost the artistic value, what remains is a commercial value. Just the same way as some automated domain appraisals, that cant see a difference between internet.com and intornit.com. Both domains have 8 letters and .com extension and both ae valued as the same. It takes a human or a top software to see the difference.
So, its easier for anyone to adopt an automated PPC system and domain aquisition method. Its not creative, but it generates revenues.
Joana says
dark Blue Sea seems to have stopped trading 1 week ago. just like DESTRA went bankrupt.
the domain names they list are worth nothing. Any idiot can buy domains for $6.95 like what Dark Blue Sea is valuing at $1000 each.
Why are all the major investors getting out of this stock? because they own NO 1 word generic names. All their names are poor quality