Marchex, Inc. (NASDAQ: MCHX), today announced they have entered into a definitive agreement to sell its remaining domain portfolio of more than 200,000 domains to GoDaddy Inc.(NYSE: GDDY).
Under the agreement, Marchex received cash consideration of $28.1 million from Godaddy, plus additional earn-out payments the terms of which were undisclosed including the maximum additional earn out.
Marchex also announced it sold $6.7 million in direct domain sales since January 2015 so the aggregate proceeds for all for its domain portfolio is $34.8 million, as well as additional earn-out considerations.
I spoke to Pete Christothoulou, Marchex Chief Executive Officer yesterday about the transaction who confirmed that the remaining 100,000 domain names they acquired back in 2004 from Yung Ye/Ultimate Search for $164 Million dollars were included in the transaction.
Marchex announced that since they acquired Yung Ye’s portfolio they have sold a total of $80 million in domains and generated more than $290 million in cumulative revenue, excluding domain sales.
It’s important to note that what we announced selling today is NOT directly comparable to what we acquired in 2004, as we have sold certain assets since that time.
Mr. Christothoulou also told me that Marchex would not be releasing details surrounding the $6.7 Million dollars in domain names they sold since January 2015.
According to Pete the domain names Godaddy acquired from Marchex will be for sale through Godaddy/Afternic.
Mr. Christothoulou told me that Marchex is now out of the domain business “Our complete focus is on establishing Marchex as the world’s leading mobile advertising analytics company”, therefore we at TheDomains.com will no longer follow the company.
Its a pretty stunning turn of events for Marchex which announced in 2012 it was going to spin off its domain name division into a separate public company, before abandoning the idea in 2013.
Huge news.
They sold all their zip code domains , but not to GD. That is probably a big part of the $6.7 million “other”
Whatever “revenue” they had from the portfolio has been well and truly blown in expenses by this bloated company.
A share price decline from $18 to $4 in the last 11 years.
140 bucks a name.. merely enough to cover the renewal fees over the years
$ 164mil / 100,000 = $ 1,640. each
$ 28.1mil/ 200,000 = $ 141. each
Do not know if the $ 80mil (domain sales) includes the GD sale (28.1mil)?
Obviously, they purchased over 100k domains above the Yung Ye purchase.
We do not know their acquisition cost for the add’l 100k domains.
And, we do not know the ‘quantity’ of domains they sold over the past 10 yrs.
Overall, as a domain flipper they lost money.
Fortunately, they utilized the traffic to make the entire domain ownership profitable.
With Marchex and NameMedia selling their portfolio in the past 9 months, does this signal the beginning of the end of the domain investment cycle?
Who will be next? Frank Schilling, Michael Mann, Rick Schwartz, Scott Day, Michael Berkens, Ron Jackson.
so another confirmation thats domain names have value, sellable, actual cash value. When all else fails, you still have names and names have value, and and an asset to sell. So in total they get either 80 million or 100 million in cash to fund EACH AND EVERY dream they may have ever had in the most exciting business out there right now, mobile advertising.
I dont see a company selling 100,000 apps for 80 million, or 100,000 twitter handles. Becuase you dont own anything when you rent from another company’s ecosystem, all the value is on the landlords side in the terms and conditions.
How many companies out there could ever dream of pivoting, and getting cash out. Its like looking in your closet and realizing you can sell everything in your closet for cash and buy a new warddrobe.
Now to valuation, is it any surprise that a bulk wholesale purchase is 5-10% of potential value, thats about the same as they paid when they bought the portfolio (in stock). It is the indivudal name purchaser who get the great deal when they buy one name, and take it from being worth $1000, or $10k, to being worth 100k or 1 million with a website.
In bulk, you go back to wholesale value. becuase for every good big city plus service name they own, theres a long tail keyword probably worth zero. For all the NNNNN they kept that have more value now than 2009, theres some other stuff that you couldnt get $5 for on flippa/namejet.
welldone marchex.
page howe
You are absolutely right – every word.
Just love how you look at each event and learn something valuable, Page.
This is a great buy for GoDaddy as they have a competitive advantage with their marketplaces.
Hello MHB,
Those who say there is a shortage of Legacy Domain Extensions, will now see a Massive amount of Small Business Online expansion. This massive new Small Business expansion, will cement the Legacy Extensions ( Established (First To Market) Beach Head ) therfore assuring Legacy extensions dominance over the New Quasi-Derivative gTLD Hordes, which by the way 99% of the New Quasi-Derivative gTLD Hordes will never be developed as stand alone Online Business Sites.
So what will this do to the New Quasi-Derivative gTLD Hordes Utility values ?? We know the answer do you ?? JAS 4/22/15
Gratefully, Jeff Schneider (Contact Group) (Metal Tiger)
Even if we give a zero valuation to 100,000 domains out of the approx 200,000 included in the transaction, theoretically attributing all the value to the Yung Ye/Ultimate Search portfolio, the wholesale (bulk) selling price per domain, when compared to the initial (bulk) wholesale purchase price per domain in 2004, has decreased significantly and it looks more like a “liquidation price” … not a good sign … but that’s also the price to pay when a company changes business model and it’s in a hurry to divest/monetize its portfolio to fund the new core business …
They clearly lost money in their “domain trading” activity.
Overall, according to what Marchex CEO told Mike Berkens, since they acquired Yung Ye’s portfolio, the company got 80 mln $ from domain sales and 290 mln $ of income from them (parking, etc), but it’s unclear how much they paid for approx 100k domains out of the approx 200k names sold, so we can’t calculate the ROI.
Furthermore, you have also to include in your calculations the renewal costs for the whole portfolio for an 11-years period … assuming $10 per domain for 200k names, it would be 22 mln $ …
What we can say is that if the purchase price of their other 100k domains is in line with what they paid, wholesale, on average, for the Yun Ye portfolio, their annualized ROI for the 11 years period would be pretty poor …
When a large player exits the industry at what appears to be a disappointing price per domain, one has to wonder if that is a reflection of the outlook for this industry. However, it also is probably a fairer representation of what one can realistically expect for average domains than the typical headline sales one reads about where newbies are led to believe a domain sale of five figures is the norm.
How many buyers are there for portfolios of hundreds of thousands of domains? That is one major issue.
Another is these monster portfolios often have large amounts of dead weight domains. These are domains that might have TM issues, make no revenue, or have no obvious resale value. While many of these domains are assets, many are also liabilities.
The management of a portfolio this size takes a lot of additional resources as well.
Brad
Well said Brad, I totally agree.
And renewal fees have to be paid each year, so domainers with large portfolios have to sell each year enough names (or earn enough parking income) if they want to stay afloat …
A 50k domains portfolio is at least 450-500k $ in renewal fees/year, not exactly peanuts … lol
So, as also Rick Schwartz said, avoid names that are only bills … aka dead weights aka pigeon shits … 😀
The fake Google clicks biz is declining.
The price seems pretty fair for both parties, in my opinion. It’s much more than Endurance paid for BuyDomains (per domain) and it can’t be easy to find many buyers at that size.
It will be interesting to see how aggressive GoDaddy will be in selling these and what their pricing model will be. Nothing like a little competition for us little guys! 🙂
Without knowing what “additional earn-out considerations” there are, all per domain pricing is speculation.
Maybe the time / resource saving for them was worth more than it would take to sell the portfolio piece meal.
And who else has $28m to spend on buying domains at the current time?
“Without knowing what “additional earn-out considerations” there are, all per domain pricing is speculation.”
That’s why more than one people here already mentioned that some data/stats are missing to a proper valuation … 🙂
I think you know what the term “assumptions” mean in Finance.
Well said Page. Best takeaway here.
additional earn-out considerations could mean $1 or millions of dollars, Pete refused to give me any information including what the max earn out could be
Yung Ye’s zip code portfolio has minimal value IMO. There’s very little local search using zip codes, and the minimal amount of zip code searches there are make the prospect of rolling out a national network of zip code based services search cost prohibitive. The most populated zip in the US is Chicago, 60629 and “homes for sale 60629” is the most searched 60629 term with a whopping 90 exacts a month. Zip numerics mean nothing to the Asian market, and quite frankly a lot of the better domains in the portfolio are gone. So this is Marchex getting rid of an anchor that’s been a distraction from their core business. They know the best days are long gone, and only a fraction of the portfolio is ever going to get sold.
Side note, there’s certainly better ways of investing $160MM though, and I can’t say that their 11 year ROI is a win. They could have purchased 80 million shares of Apple in 2004 for $160MM.
All that said, overall they’ve done much better than other companies who plunged hundreds of millions into URLS during the peak.
It will be interesting to see where GoDaddy prices some of the remaining premiums at.
Good assessment. 80 million shares of Apple would have been awesome. They would have made a bundle.
Any of these domain names in the Yung portfolio could have been developed into major companies to multiple this large investment. It’s mainly about leveraging a portfolio to make a ROI. Parking was once a lucrative business model. However, domain sales is necessary to maximize revenue.
A domain name such as WatchMovies.com probably made thousands per month in ad clicks. Competition may disrupt this business model (domain parking), influencing overall earnings.
Sean
As zip codes your right those domain names have no value but as NNNNN.com domains they do have a value and I get offers on the 100 or so I had registered as Zip Codes back in the day in the low $x,xxx range but haven’t sold any.
There was a bulk sale not long ago of i want to say of a few hundred that I think sold for $40K.
As for what else they could have done with the money, they were a public company that needs to have operating businesses not just investments in Apple.
So I don’t think for this particular company that is a fair comparison
I wasn’t being serious about the Apple Stock, and as I said, compared to other companies who lost hundreds of millions, Marchex did alright. Hindsight being 20/20 and all that. Everyone thought domains were going to continue to remain little mini ATM’s, but the party’s over and domains that made $1K a day parked in 2007, now make $20 a day. So it’s easy to understand how badly Marchex and other investors got smoked.
Regarding zip code domains, sure they have some “relative value” in the domain aftermarket, but is that marketplace really going to improve? And in all reality, what the hell do you do with zip code domains? They don’t get traffic, monetization is extremely difficult and you only need to look at what a debacle AOL’s failed $200MM investment in Patch.com (micro GEO play) to see that a zip based micro GEO business is an almost impossible nut to crack.
http://www.nytimes.com/2014/05/19/business/media/patch-sites-turn-corner-after-sale-and-big-cuts.html?_r=0
Hello MHB,
The largest Driving Factor of any asset class is ( Long Term Sustained Demand ) The Legacy .COM Platform Extension has this most important Characteristic. JAS 4/23/15
Gratefully, Jeff Schneider (Contact Group) (Metal Tiger)
I took a peek at some of those premium domains the Marchex portfolio:
Salsa.com
Refinancing.com
Futbol.com
Debts.com
Cuisine.com
Fotos.com
Pirate.com
and dozens of premium domains. Surprised these weren’t picked up and/or sold by brokers, before selling the portfolio at about 1/10 valuation to GoDaddy.
We just posted the top 2,000+ on DNSR.com.
Sean
Top 2,000 based on what metric?
Thanks, Sean Sullivan. Some amazing names in that portfolio. That had to be the top premium domain portfolio on the market – those 2000 names, unless of course, some one/Company has hundreds of 2 letter/number .com domains.
Mucho inventory. Lots of choices.
Isn’t this deal in direct violation of ICANN’s Registrar Accreditation Agreement 3.7.9 which states “Registrar shall abide by any Consensus Policy prohibiting or restricting warehousing of or speculation in domain names by registrars.”
https://www.icann.org/resources/pages/approved-with-specs-2013-09-17-en
Info guy
I think the key is this
3.7.9 Registrar shall abide by any Consensus Policy prohibiting or restricting warehousing of or speculation in domain names by registrars.
I don’t think there is any “Consensus Policy”
I think its built into the agreement if ICANN ever passes one