Is Sedo Worth $350M?
Annual domain study sheds light on firm’s prominence in domain market.
We know Sedo is a behemoth in the domain industry. But just how big is it and what is the firm worth? Sedo’s latest domain market study, along with majority owner AdLINK’s financial notes, sheds some light.
AdLINK right now owns 75.94% of Sedo. It purchased 52.14% of the firm in 2005 for EUR 14.031M, giving the firm a pre-money valuation of approximately EUR 28M at the time. A year later in November 2006 AdLINK purchased an additional stake, bringing its share from 52.14% to 75.94%. The purchase price was EUR 34.5M, giving the firm a pre-money valuation of regarding EUR 145M pre-money.
Now lets back into Sedo’s growth numbers since November 2006. I reviewed AdLINK’s 9 month note that included numbers from September 30, 2006. The numbers show:
-5.65M domains parked at Sedo
-2.15M domains available for sale
-395,000 registered users
-EUR 29.4M sales for three quarters ended Sept 30, 2006
Since this is regarding the time of the buyout of approximately 25% of the firm for EUR 34.5M, this is a good starting point for determining the current value of the firm.
Here are the stats 1 year later for the three quarters ended November 2007:
-8.9M domains parked
-4.2M domains available for sale
-EUR 44.8M revenue
Sedo’s fresh annual domain note show the following stats for 2007:
-$72.2M (EUR 49.8M) domains sold in 2007, up from $45.1M in 2006
-Paid $50M (EUR 34.5M) to parking clients in 2007. If the firm pays 50%, this means Sedo earned $50M in revenue from parking last year
-Now has 10.5M domains listed for sale. This seems to jive with the “domains parked” numbers in AdLINK’s notes.
-600,000 registered users
If we assume EUR 34.5M in domain parking profit and the firm earned a 10% commission on domain sales (regarding EUR 5M), that gets to EUR 40M revenue for the year. That’s obviously too low given the November 2007 stats. So Sedo is either making a higher average commission, a higher cut of parking revenue, or bringing in revenue from other sources such as webhosting affiliate relationships.
Regardless, let’s assume revenue of EUR 60M-65M for 2007. Revenue is up regarding 50% from the prior year. If margins stay the same, this would potentially indicate a 50% increase in valuation, assuming solid growth forecasts.
It’s clearly hard to value a firm like this, but I’d put the nut at regarding EUR 250M, or roughly $350M USD.
Compare this to the $3.726M NameMedia paid for Afternic in 2006.
Now, it’s been a while since I graduated with my finance degree. It’s also been a while since I’ve done firm valuation. So take a look at my numbers and let me know if I’m missing something.
But regardless, Sedo can be considered a huge success story in the domain industry.
