Ever seen a great deal get done and think to yourself, “I wish i could have been involved in that one?”
Well you may have your chance.
As you will recall that Yung Yee, arguably the best domain portfolio ever available, sold his portfolio several years ago for $165 million to Marchex, a publicly traded company.
As of yesterday, Marchex closing price of $4.57 the market cap for Marchex ($175M) is just slightly more than the purchase price of Yung Yee’s portfolio, several years ago. However factor in to the equation that as of last quarter Marchex was sitting on $29 million in cash then the Market cap not counting cash is $146 Million or almost $20 Million less than Marchex paid for Yung Yee portfolio.
With today’s stock market looking weak, on more bad unemployment figures, it looks like Marchex market cap may decline even further.
So the bottom line is, if you believe the domains are worth more they were a few years ago when this portfolio was sold, you now have a chance to own a piece of the portfolio, by buying some shares of Marchex, at a discount from what Marchex bought the domains for.
I thank the couple of readers who bought this to my attention.
His name should be Yun Ye.
Before someone buys shares in a Company they need to know what plans the company has for the future.
Buying shares in a Company without doing the homework first is like jumping out of a Plane without a parachute.
Invest the smart way
Damir your posts get better all the time…
Marchex looks cheap but you didn’t factor in that ppc is about half what it was then so your paying double.
Thats really interesting. Seems all tech related companies are selling at great multiples of earnings at the moment, yet all are still dropping rapidly in value.
before someone says they were bought for the resale value… Look at yesterdays auction prices…
Seems logical at first, until you factor in the higher expenses of Marchex compared to Yung Yee’s portfolio of parked domains.
Google could buy the entire co just for the domains; paying it off w/their 100% share of the ppc earnings in a few years or so.
All easy profit thereafter.
Yun Yee had one employee, no? How many executives alone does Marchex have? How many people in management? How many in sales? How many in tech?
Lots of overhead to consider.
“arguably the best pf ever available”??? Not even close.
The bulk (all?) of Yun’s pf was from drops. Marchex had to dispose of many of the cash-flow names due to legal conflicts. There’s a lot more to Marchex than the remainder of a pf they bought 4 years ago.
I’m not saying anything about the current valuation, just that this is a misleading way to look at it.
i agree with Russ on this.
I think the company really needs to focus on Selling the domains they have!
The big issue is that PPC is down so they are making cash from there domains!
They do still own alot of domains that are typos and wwwdomain.com and also some tm cases but if you look at some of the better domains they own.
They could increase revenues hugely if they got there backside and pitched to endusers showing them the power of owning some of there brands.
They could also develop alot of there sites another way to gain traffic and help put the price of there domains assets up.
2009 is going to be a very tough year for everyone so lets hope they do something about it now.
Regards,
Robbie
Just because you own shares of stock does not give you ANY rights to the assets of that company.
You would have to buy ALL the companies shares to get rights to the assets. That is just one risk you have to consider. Also they may have all or a portion of the domain names listed as underlying collateral on company loans. ETC. ETC.
Yikes.
What a way to look at this.
Kind of like how to you make a million dollars? Buy ten million dollars in stock and wait a few weeks.
Seriously, Marchex has done a lot to develop these names but I guess it’s a shame that their valuation has come to this.
Did they overpay for the portfolio or did they just spend too much money not maximizing the value?
To be fair, this stock market is being pretty cruel to just about every company out there. Look at GM. Sure they had a crappy product but their valuation is pretty low right now too.
I bet there are lots of companies trading at a price that is less than the amount of cash that they have in the bank.
At least Marchex has assets that have very minimal carrying costs.
Great time to be in the domain business relative to other businesses.
pretty sure it’s Yun not Yung … right?
Marchex is a company that is trying to do everything that has to do with advertising and marketing if you actually look at all their services and what they offer but fact of the matter is they aren’t really good at what they do and have a lot of improving to do.
They made the right decision to acquire the portfolio because it was probably the chance of a lifetime and probably nobody else would sell theirs anyways. They have made additional domain portfolio acquisitions as well.. Smaller ones but nonetheless valuable ones with generic and top premium domains.
Marchex domains are “developed” and in some cases it has paid off big time as traffic has been increased exponentially.. In others, it hasn’t done much good and their names are actually losing money -vs- when they were parked if you do the comparisons.
This is what happens when you lose or lack focus.
Marchex will rebound though… They just need to re-group and of the premium domains should be their main focus. They didn’t get the “development” aspect of their domains right the first time around, but now almost 2 years later, I would think an update and some improvements are to come… Way overdue! They can literally double and triple their revenues over the period of a few month’s with the proper optimization.
Best,
Mike
http://www.wannadevelop.com/
Thinking about GM (thanks Rob), and it occurs to me that; similar to cos like Marchex where their assets value may exceed their total stock value; all GM’s assets (land, equipment, cash on hand, IP assets, etc) might exceed their total stock value.
Russ is 100% correct.
While some of the comments about the valuations and overheads is correct, I do want to point out a big difference between Yun Ye holding his portfolio and what Marchex has been trying to do.
Yun Ye simply had the domains parked and pointed to ppc ads. While Marchex has been attempting to create “hybrid” systems consisting of PPC ads and content. (Content they either outright own or licensed and they do come with overheads)
Also, this has rewarded them. But again what they have failed to understand is that hybrid sites are good for traffic, they decrease your chances of users clicking on ads as well as the user has more to do on your website (no click-to-exit)
Mike,
I don’t see your logic. I agree that marchex stock price is bottoming out but if anyone were to buy stock in this market there are plenty of profitable companies that are much smarter investment.
Besides, by your logic you should better buy yahoo stock because you would be buying a piece of broadcast.com that was once sold for $5.3 billion dollars. I think everybody forgot about that one. That is the highest domain ever sold and i call it a domain sale because yahoo never used anything else from Mark Cuban’s company. The domain is all is left. Business.com doesn’t even come close but it’s a much smarter buy.
Phil
Broadcast.com was a business, regardless of Yahoo use and was valued as such, so that is not a fair comparision.
I’d buy them only if I had control of them. You are buying into a company that has not shown me anything. Parking domains is easy, running a business is hard. I’d own them and focus on developing 1-5 domains at a time into real businesses. Check out our skateboards.com and videopoker.com domains that took a lot of effort and focus to make them a business.
It take time to do research and find out why marchex loosing money did they flipping domain and creating new portfolio.
I believe to buy new names rather to invest in stock as it not sure do they only invest in that portfolio or use that money somewhere.
Any way we have open our portfolio for sale on very cheap individual domain price.
Visit us at http://www.adomaindeal.com/portfolio
I know the owners and CEO of the company as I live in the city.
FYI, the CEO is the highest paid employee…about 10million usd per yr.
go figure…am not interested in putting a penny at all
@BullS-
I’m going to call B.S. on you. The CEO made a whopping $50,000 salary last year. He received $1,777,489 in stock awards (worth a lot less now).
$50k plus stock does not equal 10 million.
http://seattletimes.nwsource.com/html/businesstechnology/2004476802_ceopay15.html
Andrew:
here the link
http://seattletimes.nwsource.com/html/businesstechnology/2004476802_ceopay15.html
http://seattletimes.nwsource.com/html/businesstechnology/2004477629_ceotop2015.html
The top-paid CEOs in the Pacific Northwest
The 20 top-paid CEOs in the Pacific Northwest, their company and total compensation.
1. James Voelker InfoSpace $38,143,383
2. Benjamin Wolff* Clearwire $15,069,344
3. Kerry Killinger Washington Mutual $14,364,883
4. John McAdam F5 Networks $12,896,891
5. Granger Cobb* Emeritus $12,459,371
6. Russell Horowitz Marchex $10,754,000
7. Mark Pigott Paccar $9,456,682
8. Steven Appleton Micron Technology $8,594,234
9. John Carter Schnitzer Steel Industries $8,431,117
10. Dara Khosrowshahi Expedia $8,027,655
11. Mark Donegan Precision Castparts $7,951,136
12. Jonathan Klein Getty Images $7,753,491
@BullS – The seattle times is obviously counting stock based comp to be much higher than it is. Review the proxy statement for the actual details of his comp, including only $50k cash last year.
http://www.sec.gov/Archives/edgar/data/1224133/000119312508079492/ddef14a.htm
Do you think he has the incentive to run the company at $50k?
He has good buddies at Microsoft and the IT community to back his pet project.
Of course not. That’s why he gets stocks.
For $4.57 per share you can either buy shares or get your own domain names from drops or think of some new ones in lucrative markets or brand something that is viable in the future. Buying stock in anything right now is very risky and gambling is more fun! Come on Google is even below $300 a share and they are obviously on the cutting edge of internet technology so why would marchex be a good play is beyond me. The comments are right on about valuation, lower ppc earnings and poor marketing plans. Take a look at what was just for auction down under this past week and you can see there are STILL some really good deals out there on one or two word domains…
Anybody want to take a guess.. How many of their domains are actually most productive… The 80/20 rule probably holds true and should be applied.. I think they only have maybe a few thousand realy good domains though at best and the rest are nothing special worth a few hundred bucks if today they hit the domainers/reseller community for a fire sale and in the aftermarket maybe a grand a pop… 🙂
More and more internet based businesses are shutting down various operations that are really unproductive and have no potential — I wonder if Marchex is going to cut next.
They cut their SiteBox parking a few days ago
😉
Russ
You doubt may statement that this portfolio was “arguably the best portfolio ever available”???
You say “Not even close”
Wow
What would be the portfolio’s that were available in this price range that would have been far superior to Yung Yee’s?, besides yours?
So guys
our basically saying that either the portfolio was overpriced at $165 or the value has drastically decreased in the few years since the acquisition
As far as it being a bad buy of an overpriced asset, I don’t recall anyone taking that position at the time of sale.
If you believe the asset is no longer worth the purchase price have you reduced the prices on your domains as well?
It’s one of the best domain portfolios in the world… Who cares whether it’s the best or not or whether it was a good price as the rules of the game have changed. It is what it and they have plenty of domains that could sell for thousands that don’t make anything parked so they should start selling off if they really want to re-focus and get people excited about the bigger picture.
A lot of bad decisions later…. domains are still domains and even though they may not be optimized properly to make the most of the traffic and all the great opportunities that should be taken advantage of 4 years later which exist today……. there still is hope.
Forgot to mention, Mr.Yee gets 15% of the revenue.
FMA portfolio far superior IMO, and how things have changed over the last couple years since he sold seems like 300 years ago. There are many companies worth investing in that are much better buys than Marchex IMO, Companies selling for below Cash per share.
our basically saying that either the portfolio was overpriced at $165 or the value has drastically decreased in the few years since the acquisition
Probably both
As far as it being a bad buy of an overpriced asset, I don’t recall anyone taking that position at the time of sale.
Self Interest probably, greater fool theory at its best.
You do make a good point Mike while people are criticizing Marchex you know they not lowering their price, which if Yun Yee portfolio worth a lot less then some people here have possibly a worthles portfolio.
@BullS –
I think the reason your source is different from the proxy statement is because the shares have a vesting period. My guess is the newspaper just valued the complete sum of all of the shares even though he only gets a portion of them in the first year. I agree that it’s a lot of shares, but shareholders should be more comfortable with a CEO getting $50k salary and millions in shares as opposed to millions in money and a little bit in shares. He has an incentive to keep the stock up.
Andrew…I wish that could be said for all the CEOs…pay for performance like the GM/Ford and…etc
thanks
good post