Acquire or Die: the future of domain parking firms
Domain parking firms must start acquiring domain portfolios — or get out of the business.
A little over two months ago Oversee.net, parent of domain parking goliath DomainSponsor, disclosed that it purchased a portfolio of 35,000 domains. The firm stated is was gearing up to acquire even more domain portfolios. Perhaps DomainSponsor has realized that it can’t stay in the business of servicing other peoples’ portfolios forever — it must own the domains to guarantee future income.
Consider this. You have a portfolio of a few thousand domains that generates $10,000 per month in parking revenue. Then, suddenly, the spigot is turned off. Your revenue drops to $0.
This scenario is exactly what’s happening to domain parking firms. Their best clients are selling their portfolios to the industry’s domain portfolio consolidators, such as iREIT. One day the parking firm has a good client bringing in thousands each week; the next day that revenue is gone.
As portfolio consolidation continues, domain parking firms must take control of their own futures by owning the domains. Don’t get me wrong — there’s still a lot of money to be made in helping others monetize their domains. But the big domainers that generate the bulk of the revenue are the most likely to sell their portfolios. When the portfolio is sold, all of the domains are transferred away from the parking firm and into the consolidator’s own parking system.
InterSearch Group is another firm that gets it. The firm realizes that the data it gets from parking other people’s domains is rich and valuable. In fact, most domain parking firms know more regarding the traffic coming to domains than the domain owners do. InterSearch runs ParkingDots, and offers an 80%-100% revenue share. The firm hopes to purchase high quality domains that are parked with its service. In May, ParkingDots disclosed it was launching a multi-million dollar fund to purchase domain names. And the firm means business. InterSearch spent over $10M to acquire IRS.com.
NameDrive is also focusing on acquiring domains for itself and select partners. Its “Park and Sell” program lets clients park domains for a month and sell for a multiple of the revenue. NameDrive isn’t inviting fresh buyers into its program, perhaps since the firm wants first crack at your domain portfolio.
What can domain parking firms do to stop losing sizable portfolios? They don’t necessarily have to shell out the cash today to buy portfolios. They can create “first right of refusal” agreements with their clients. In exchange for offering a slightly higher revenue share, the domain name owner agrees to give the parking firm the opportunity to make a bid on his portfolio ought to he receive an offer to sell. This is a win-win for both the parking firm and the domainer.
It will be interesting to see where the domain portfolio buyout business is one year from now. Sizable portfolio aggregators are paying fairly low multiples for domains right now since they’re the only ones who can shell out millions for a portfolio. As more firms get into the game, look for portfolio multiples to increase.
