BuyDomains is a natural fit for Endurance, and you need to look at more than price-per-domain to understand its value.
Endurance International, a $2.1 billion (market cap) rollup of hosting and domain name companies, announced this morning that it acquired BuyDomains from NameMedia.
The tie-up makes sense for Endurance, which is generally considered the #2 domain name registrar in terms of domains under management. It will now be able to sell its massive customer base a premium, high-margin product. BuyDomains will also be another customer acquisition channel for Endurance’s web presence services.
“One thing we continue to do is look for opportunities for our customers to get online in a thoughtful way,” Endurance EVP Brian Unruh told Domain Name Wire today. “We’ve been attracted to the BuyDomains team and business [for awhile].”
The acquisition includes a portfolio of nearly one million domain names, the two BuyDomains storefronts (BuyDomains.com and DirectDomains.com) and associated intellectual property. The intellectual property is essentially the data and algorithms that BuyDomains uses to decide which domain names to register and acquire, and at what price.
Both companies are based close to each other in Boston, and the BuyDomains team will move in with Endurance shortly. BuyDomains will be run by Jason Miner, who has been the COO of NameMedia.
Although the one million domains that came as part of the acquisition have value to Endurance, the company does not plan to start acquiring other domain portfolios.
“Endurance is not going to turn into an acquirer of portfolios, but the BuyDomains business will continue to acquire domains,” Unruh said.
Endurance announced the acquisition in combination with two other acquisitions, totaling $77 million. On the investor conference call this morning, Endurance executives stated that at least one of the other companies was very small, so BuyDomains probably makes up a large chunk of the $77 million. [Update: Endurance paid $44.9 million.]
Is that a good price?
Assume, for a moment, that the entire $77 million was for BuyDomains. With 950,000 domains (based on nameserver records), that comes out to about $80 per domain.
That might seem like a low valuation for a company that regularly pays more than $80 to acquire domain names at auction and has a median sales price that hovers around $1,200-$1,500 per domain. But remember, the company doesn’t sell 100% of its domain portfolio each year.
Suppose the company sells 2% of its portfolio each year at a $1,000 average price. That would be $19 million in revenue. Then you need to subtract about $7.5 million in annual renewal fees, plus the overhead of running the business, and some portion of continual domain acquisition costs. Suddenly, a price tag of less than $77 million makes sense. Granted, we don’t know the actual price and metrics, but the point is that you can start to make a case for a valuation at multiple price points below $77 million.
The latest official numbers available about the company were disclosed in NameMedia’s 2008 amended S-1 filing. In 2007, the NameMedia’s marketplace business (which excludes domain parking) had an EBITDA of $16.848 million. Remember, that includes the Afternic business of selling third party domain names, which NameMedia sold to Endurance competitor GoDaddy last year.
(Also from the S-1: NameMedia paid $72.5 million plus some equity for the BuyDomains business in 2005.)
On its investor conference call today, Endurance executives said the acquisitions have an EBITDA in the mid-single digits. That can be a good deal for a public company as a buyer, and also a good deal for a private company as a seller. Especially one with slowing growth.
From NameMedia’s perspective, it already sold off its Afternic business. Only the BuyDomains business remained, and its investors were surely looking to close out the investment.
so did they make any money because that’s about what Name Media paid Mike Mann
It’s really difficult to answer that question. They paid Mike about that much, and that was probably a smaller portfolio. They then made a ton of parking revenue on those domains, used them as the basis for creating their overall market strategy, got lots of data, etc.
And again, we don’t know if they got $50M or $70M or something else, so hard to say.
“Suppose the company sells 2% of its portfolio each year at a $1,000 average price. That would be $19 million in revenue.”
If we suppose that’s correct (or close to correct) number, then $76M is a real steal in my opinion.
You don’t buy a mature business based on revenue, you buy it based on profits.
The only real cost is renewal fees of 1M domains. Other costs can be decreased or increased. That makes $11M negotiable money which equals 7 years ROI. Still, it’s a steal imo.
If you’ve ever bought a domain from BuyDomains, you know it’s more than just a website. They have a great team of people managing the website, handling sales, and acquiring domains through portfolio sales and auctions.
$80/domain in average?
OUCH!!!
Now everyone is looking at his portfolio disapointed…
There must be something missing or hidden otherwise please indicare me where I may find the domaining exit door asap.
BuyDomains found their exit door 🙂
Guess the billion dollar purported portfolios are out the window for that matter even the $100 million dollar portfolios are as well, maybe sellers will realize their domains are not worth the ridiculous amounts they desire and loosen prices to create liquidity. As those ridiculous prices hold down liquidity. If we had more liquidity in the market or at least a fair market value system where people/investors could liquidate then we would see real investment into this industry but since there is none, we will remain ‘snake oil salesmen’ to the rest of the real investment world. The value of an asset is a direct correlation to the revenue it derives and/or the fair market value as determined by a fair liquid market. As indicated in this purchase regardless of what they bought it was approximately 6x EBITDA, so making an argument for anything more or at some intrinsic valuation simply does not work on a grand scale with real money investors. Sure we have all sold one off domains for hundreds of thousands or millions of dollars but the fact is, that is like hitting the lottery, not really much of a business model there and definitely not something scalable or sellable to the outside world. We think we are an industry but that is only within our industry. We have been diversifying since the last google update and I think its an indication where we are heading by looking at the most successful person in the space and what he has done at diversifying himself as well. The game continues to change and everyone should be aware as there have been a lot more multi-billion dollar brands built in the last decade on brandable names than on generic names and that trend will continue.
It’s true many domainers overvalue their domains but it’s not as cut and dry as to say that all domains are overvalued because of one (1) portfolio sale that we don’t even know the full details of.
What I find the funniest about these types of comments are the disconnect between the asking price and the actual price the domainer is usually looking for. It’s a negotiation people, you start low and I’ll start high. If you give up after seeing the sticker price you’ve already lost. I’ve talked five figure asking prices down to $500 so thanks for passing on those I guess.
Also, what’s really holding down liquidity is MINIMUM COMMISSIONS. Lots of domainers would be thrilled to sell their hand regs and low price drop picks in the low xxx range but they’re not going to pay Sedo et al more in commission than they’re making in profit. Brokers whine that they have expenses, so does everyone and yours are MUCH lower than any other industry. Furthermore, most brokers aren’t even worth their fee. Buyers visit the domain and fill out a form which is followed up by some of the worst written, most obtuse sales pitter-patter I’ve ever seen and if a buyer wants the domain bad enough they ignore all that and buy it anyway *despite* the broker, not because of. The broker has very close to ZERO influence in the process for all but the most premium domains and even then their contribution is minimal. Get rid of the minimum commissions and watch the low end of the market heat up.
It’s really good steal for buyers.
BuyDomains might be invest in new gtlds to fetch more revenue…
IMO.
I think the acquisition makes solid business sense. Endurance is positioned to shed far more light on the domain aftermarket than the buydomains’ guys and Endurance knows it! Good luck and I look forward to the possibility of DNJournal posting sales from them.
Purchase price was $44.9 million
https://domainnamewire.com/2014/11/07/endurance-paid-44-9-million-for-buydomains/
Well, I guess if I accepted the average $2000 starting price for most my solar and robot domain names, and I have about 500 of them, the best in the world, I’d make ummmmm $1,000,000. But SolarClothing dot com and Solarclothes dot com are combined, worth more than that by 2016. Then we get into the holographs and holograms… oh my. Come on people, judging your domain values by bulk buyouts? Over 200 domains in BD’s portfolio are domains I let drop… not impressed. Learn your craft, know what you have, hold on to them, sell at a price that helps you by liquidating to cash you NEED when you NEED it.
It’s that simple. Damn, I’m sick of all the weaving and deceiving with the over thinking of domaining. Just know what you have and hold tight. Nothing is going to change regarding domain PURPOSES anytime soon, and their purpose is to lead people to a brand and to stand out amongst the “bend arounds” (those people who buy domains new, but weak, because they don’t want to pay the real value… kind of like buying a home up in Topanga Canyon for 1/4 the price of a home on PCH in Malibu. You get what you pay for. That still applies to domains.
Peace