Company getting early results from domain name portfolio.
GoDaddy released its Q3 earnings yesterday, and its 10-Q filing with the SEC gives some insight into how it is doing with the Marchex domain name portfolio.
The company paid $28.1 million to acquire the portfolio of about 200,000 domain names in April.
It’s also paying an earn-out. GoDaddy acquired three companies this year and discloses in its 10-Q that it recognized a liability of $0.9 million for earn-outs from these acquisitions. It’s possible that this is just for the Marchex deal, making it a $29.0 million targeted acquisition price.
In Q2, GoDaddy reported selling $1.2 million from the portfolio. In Q3 is reported $1.4 million in sales. I believe the Q2 number includes sales that occurred prior to the acquisition in Q2.
At any rate, these seem like solid sales numbers for a domain name portfolio at this valuation. (GoDaddy put the portfolio on its books at $26.5 million.)
I’m curious if the quarterly sales will increase or decrease over time. It’s possible we will see a short-term increase in sales numbers, and then a decrease in the long run. The short term bump will be due to GoDaddy getting all of its domains priced, and selling domains to people who couldn’t strike a deal at Marchex’s abnormally high pricing. In the long run, as the low hanging fruit is picked, you’d expect quarterly sales to drop.
Daniel Ballard says
Exactly my guess.. there is a bunch of unsellable domains in Marchex’s portfolio which will be left to rot, only causing costs (renewals) for GoDaddy to Verizon and turning it into a liability..
but that’s probably GoDaddy’s plan anyway, simply dropping all the remaining bulk once profits are overshadowed by renewal costs.. we will see
Support @QUE.COM says
When it’s drops, their auction sell it to the highest biddder and GoDaddy still make money.
Win-win for GoDaddy.
Great point Que.
Joseph Peterson says
Same with buying any diverse bulk inventory … First you figure out what you’ve bought. Then you organize it, price portions of it, place some of it on the shelf or in the showcase, make a few calls. Meanwhile much of it sits in the back room, waiting its turn.
As I recall, GoDaddy didn’t price everything right away; they simply had too much on their hands to appraise each individual domain at once. Moving too fast with pricing (they were concerned) would cause them to undervalue and lose some of their best assets.
I haven’t checked lately to see whether GoDaddy completed its pricing operations. If that’s still in progress, then we won’t see just a brief spike in sales; rather, it would be ongoing.
Large offers arrive slowly, as Rick Schwartz can attest. Eventually GoDaddy may liquidate what isn’t selling. Certainly they have the auction platform to do so. But I’d expect domains that have received no interest for years and years to suddenly sell in 2020 when some new startup comes along.
Sales figures from this Marchex portfolio may peak and then slowly taper off. But I don’t know when that peak will occur or how long or profitable those continuing sales will be. Domain investors who manage large portfolios know that total sales volume depends on other factors far more than market demand. Mainly the variables are pricing and exposure. So any shift in marketing outreach by GoDaddy could have a huge effect up or down.
Support @QUE.COM says
They can milk more on these domains if they will allow installment payment as part of their operations, instead of waiting for many years before someone buy it to them.
HugeDomains are doing it, and other small after market.