Consolidation continues as CentralNic buys major domain traffic company.

From speculation to reality in 24 hours.

Domain name industry rollup CentralNic (London AIM: CNIC) is acquiring online advertising company Team Internet AG for $48 million.

$45 million of the purchase price will be in cash (with $3 million deferred), funded with a bond offering. This will bring its net debt to $76 million. CentralNic already raised €50 in a bond issue earlier this year.

Team Internet operates two businesses: domain parking company Parking Crew and direct traffic business Tonic, which deals in a lot of zero click traffic. The company grossed $66.7 million of revenue and $10.6 million of adjusted EBITDA in the 12 months ending June 2019.

Team Internet montizes over 20 million domains. CentralNic believes that domain parking could be bundled with 30% of domain registrations, and notes that the group has 18.6 million domains under management.

It would seem that the advertising revenue Team Internet generates is more susceptible to swings than CentralNic’s core subscription revenue businesses. Indeed, CentralNic notes that Team Internet’s revenue has dropped due to “an industry-wide policy revision for the long-term health of the online advertising ecosystem in summer 2018.” However, “As a result of a series of innovations and continuous improvements, Team Internet has returned to growth in Q3 2019 and is expected to do so going forward.”

The domain parking business has to reinvent itself every couple of years as a result of policy changes, browser changes, and other influences on the market.

The acquisition gives CentralNic exposure to the zero click market, which has a lot of bad actors and malfeasance. Keeping control of zero click will be critical to its long term success. It could also include exposure to arbitrage, which is somewhat fickle.

It will be interesting to see how this plays out.