Domain name valuations and sales

The DN Journal (a lowbrow US domain name industry news magazine) tracks domain name sales in its “Year to Date Top 100 Sales”. You can read the top 100 list here. Topping the list is diamond.com sold in 2006 for US$7.5 million.

Another recent big .com sale not yet on the DN Journal list is Branson.com. It was sold by an American, Larry Milton, for US$1.6 million. The site is being used for a Branson tourism site. The site runs on an online advertising business model and looks like an online highway full of billboards. Branson, Missouri is located more than 250 miles southwest of St. Louis. According to the St Louis Business Journal it attracts more than 7 million visitors annually. If Pixar did sequels (it doesn’t) and was into bad taste (it’s not) then it might be inspired by the Branson.com story to tell the tale of online advertising bringing people off the highway and into town.

If you incorrectly type Branson, as I did, and type Branston.com you’ll be redirected to the site of a British potato supplier!

The big business of living off domain names and Google AdSense

Domain names which are not spelled or typed correctly brings us to our next subject. It concerns Dark Blue Sea Ltd, an Australian public and listed company based in Brisbane. It derives advertising revenue, among other sources of income, from errors in domain name searching. Terms used to describe this include typosquatting and URL hijacking resulting from misspelling, typing errors, and using the wrong domains (eg .com not .com.au). These error-based revenues would reduce if like Google big brand owners were more vigilant with letters of demand, legal action and registration of a portfolio of domain names sometimes linked to appropriate trade mark registrations. They could then more efficiently and economically apply trade mark and other law against online free riders, pirates, knock-offs and passing off activity. However as regards abuse of their brands many companies have an ostrich IP portfolio management strategy.

That is one reason why Dark Blue Sea gains. It directs eyeballs to ads on its sites and to its domain name selling site, Fabulous Domains. However it failed against Playboy Enterprises International, Inc which in 2002 obtained a ruling against a company related to Dark Blue Sea and in the process obtained an order for transfer of a heap of names featuring the Playboy name, including germanplayboy.com, online-playboy.com, virtual-playboy.com and even britney-spears-playboy.com. To keep this in focus, I note again that Dark Blue Sea appears to have many other revenue sources, as is evident from the Products section of its Website.

Lisa Murray of The  Sydney Morning Herald writes Dark Blue Sea owns about 545,000 domain names. She adds in her 12 December 2006 report that “Last year, DBS earned US$5.7 million from its domain name portfolio – US$4.4 million in advertising revenue and US$1.3 million from name sales.”

Last week the Photon Group Ltd [ASX profile | Website profile] announced a A$54.5 million bid to take over Dark Blue Sea Ltd. The bid is conditional. Like Dark Blue Sea, the Photon Group is into acquisition of digital real estate. It is a consolidator, having with takeovers and collaborations acquired numerous businesses active in online marketing, market research, field marketing, advertising, public relations and digital media development. They include See Life Differently, Blast PR and Presence, Demonstration Plus, iMega, Jigsaw Strategic Research, Belgiovane Williams Mackay, and MediaZoo. Lara Sinclair writes in The Australian on 12 December 2006 that the Photon Group has spent A$130 million on acquisitions so far in 2006. She notes “Shares in Photon, which had reported a 56% increase in EBITDA to A$28.1 million, on revenues of A$126 million for the [2005-06 financial] year to June, closed at A$5.96” on 12 December 2006.

The background to the Photon Group play is that it raised A$18 million when it floated on the Australian Stock Exchange in 2004. It was already on a consolidation trail. Prior to floating, it consisted of 13 specialist businesses, with activities ranging from public relations to direct marketing and advertising. Its co-founder were Simon Reynolds, a former John Singleton Advertising director, Tim Hughes and RG Capital.

The bigger business of online advertising

"nielsen_logo"Online advertising in Australia, and the ripples of its impact on traditional media and online businesses, produced a succession of dice rolls in media M&As (mergers and acquisitions) in the final three months of 2006.

More are on the way. I say that because of the continuing impact of the latest figures from Nielsen in Australia, the United States and elsewhere. They indicate online advertising grew faster in 2006 than was the case in 2005.

"online_ad_projections"I also say that because of the deal flow we are seeing in our firm, including a client involved in the BlueFreeway Ltd float. Like the Photon Group’s recent acquisitions, the float of BlueFreeway is a consolidator’s play. Its “Portfolio Companies” are Agency Fusion, Cogentis, Communicator Interactive, Deepend Sydney, Destra Hosting, eHound, Forty Two International, IXION, MassMedia Studios and Spin Communications. The BlueFreeway offer closed on 14 December 2006 and it was “substantially oversubscribed”. It has raised A$36.3 million and will float on 22 December 2006.

Like the Photon Group, BlueFreeway seeks to benefit from soaring revenues from online advertising. In its prospectus you’ll see the above graphic. At Lightbulb we steer away from projected figures. But these projections sourced from ZenithOptimedia are credible, at least as regards the broad trend favouring online advertising.

Noric Dilanchian