Stocks Mixed in 2006 — Domain Name
Some up, some down, but enthusiasm for domain name firms remains high.
Ask any domainer and he will tell you the domain name market was up in 2006. But the same can’t be stated for all of the firms catering to this space. Here’s a lowdown on how firms that make money from the domain name industry fared in 2006.
Marchex (NASDAQ: MCHX) – Marchex opened the year at $22.41 and closed at $13.38 per share, losing over 40% of its market value along the way. As stated by the Seattle Post-Intelligencer:
Seattle’s Marchex Inc. saw its market value drop 41 percent to $524 million. The firm matches advertisements with relevant Web sites, which helps content publishers make money from Web hits by driving traffic to merchants’ sites. It launched an advertising network of more than 200,000 domain names in November, but domain name trade publications have stated that some of the sites may infringe on trademarks.
Marchex definitely has some skeletons in its closet. It has been slow to monetize its domains and has a number of neglected assets. But the biggest problem may lie in domain names it owns that infringe on major firms’ trademarks.
Google (NASDAQ: GOOG) – Google has done more to spur the current domain name boom than any other firm since of its advertising platform. The stock closed Friday at $460.48 giving the firm a massive market cap of $140.98B. Will Google’s fortunes last? The firm will definitely slow down over time. But when will this happen? One of the potential downfalls of Google is its lack of transparency to its clients. It’s one thing for Google to keep its search algorithms under wraps. But advertisers are getting frustrated with the constant changes to its Adwords program. It used to be fairly simple: your position on a page was determined by your ad’s click-through rate and your bid. But now Google has added a number of other measures to make it impossible to understand how your ad is ranked. Among the changes is a quality score for your landing page. Google doesn’t tell you much regarding what makes a good landing page. It seems arbitrary to advertisers, and advertisers are the ones creating Google’s massive market cap. In December 2005 I spent over $5,000 on Google Adwords. In December 2006 I spent only $1,000. It’s not since I don’t want the traffic. On the contrary, I wish Google would deliver $10,000 worth of traffic to me every month. But I’m beginning to think that Google doesn’t want my business. Microsoft does, still. The firm launched its fresh advertising service and this December I spent over $3,000 with MSN. MSN’s system is much more transparent and user friendly.
Communicate.com (OTCBB – CMNN.ob) – Communicate.com owns a number of premium domain names and monetizes many of them by creating real web sites, such as Importers.com and Perfume.com. Communicate.com’s e-commerce stores don’t carry inventory so they carry little risk. The firm’s stock opened and closed the year at $1.35 per share but it was a wild ride for shareholders. The stock bottomed out at $.65 intraday on July 17. The good news is that investors who got in around that time saw their position double by the end of the year.
The firm right now has a market cap of $24M. Parking revenue fell for the firm for a couple reasons: First, it removed Body.com from its parking network to launch it as a site (that’s good news), Second, they saw parking revenue on their existing portfolio fall (that’s bad news).
You can see a list of the firm’s domains here. Personally, I’m most excited regarding Cricket.com. Cricket is an extremely popular worldwide sport, and there’s also potential to sell the domain to a certain wireless firm. (Incidentally, type CricketWireless.com into your browser and you’ll see a site monetized by Marchex. Hence, Marchex’s trademark problems referenced above).
On the domain sales front, I sometimes think Communicate.com sells its domains for too low a price. But the firm does a good job investing the proceeds.
Tucows (AMEX: TCX) – The domain registrar and software firm started the year at $.88 per share and finished at $.85, ending with a market cap just shy of $65M. Tucows has a sizable network of domain name resellers, but some of them aren’t high quality service providers. Tucows is right now the fourth largest register in terms of domains under management (5.49M) as stated by RegistrarStats.com.
InterSearch Group, Inc. (AMEX: IGO) – InterSearch Group owns parking firm ParkingDots and owns valuable domains such as IRS.com. Its shares made the move up from the Pink Sheets this year. Its 52-week range is $1.80-$3.18 and closed the year at $2.35 per share. That gives it a market cap just shy of $60M and a PE of 34. InterSearch has been on an buyout spree for high end domains. The firm paid $10M+ to acquire IRS.com which went live ahead of the last tax season. The firm’s ParkingDots program offers up to a 100% revenue payout in an effort to evaluate domains for purchase.
Dark Blue Sea (ASX: DBS) – Dark Blue Sea, owners of Fabulous, received a takeover bid for 65 cents (Australian) in December. The acquiring firm is Photon Group Limited (ASX:PGA). It’s not clear if the deal will go through. The firm traded at .725 as of the end of the year.
Yahoo (NASDAQ: YHOO) – Media firm Yahoo offers domain registrations, but its big play in domain names is providing pay-per-click ads on parked pages through partners like ParkingDots (see InterSearch Group, Inc. above). 2006 hasn’t been a good year for Yahoo. Its shares finished the year dow 36% to $25.54. Advertising is Yahoo’s number one source of revenue and its pay-per-click platform has lagged Google’s. You can blame being first to market for that. Yahoo’s platform is that of pay-per-click pioneer GoTo. Among the limitations of the GoTo system are separate accounts for each country you advertise in, separate ads for each keyword, and a slow backend. Thankfully Yahoo is addressing the issues with its so-called “Panama” update. I’ve by now upgraded my paid search account and it’s miles ahead of the old platform. We’ll see if Yahoo is able to turn it around in 2007.
GoDaddy – I had hoped to write regarding GoDaddy’s stock by now, but the firm pulled its IPO earlier this year. Perhaps the firm will go public in the future. If not, we might see firms such as Demand Media traded on the public markets.
What will happen to these domain name firms in 2007? Reglike will continue to provide coverage of these firms over the coming year.
