Domain Name Panel Addresses Revenue Multiples, Potential Market Bubble
Monday, August 13th, 2007
A group of domain industry experts spoke about industry trends at Domain Roundtable in Seattle today.
Strong posed a question about multiples. He asked if any of the others would sell a domain for 5x-10x earnings.
Schilling called Strong on his question. “5-10x of what?,” asked Schilling. “Your pay-per-click is different from mine. How big is the portfolio? Does it have breakup value? What kind of an [advertising] deal do you have? Direct with Yahoo? What’s your revenue share? Do you have a cost of services? [These things] skew the multiple.”
Strong took the point, but then asked, “1 name at 5x [annual revenue]. Would you sell it”.
“No”, responded Schilling. “If you’re able to make money without selling domains, then you can say no. What’s the difference between a $7,000 name and a $70,000 name? I’ve had people come to me with a $7,000 offer and watched it grow to $70,000. Somebody who doesn’t want to sell will ultimately get a proposal for almost the maximimum amount.”
Sarid said he would sell a domain for 5x-10x if the circumstances were right. “We will sell for 5-10x. It depends on the circumstances. If something happened in my house…or I need the money for something, I will probably settle for 5-10x.
“I’m actually a big fan of multiples,” Sarid continued. “It’s better to have a benchmark like 8.5x than nothing. We can watch the multiples goes up. Before Yun Ye’s multiple that was a benchmark [from selling his portfolio to Marchex], people were paying 3x. It’s great to have muliples. I’d rather have 8x than nothing.”
Jay Westerdal, CEO of Name Intelligence, asked the panelists if they thought the domain market is experiencing a bubble.
Zapolin said he doesn’t think there’s a bubble because people are starting to realize they need good domain names. “One of the things I’m starting to see is the ad agencies getting into the game,” said Zapolin. “We recently got a call from an ad agency that had a $30M ad campaign with the NFL. They said ‘the campaign kicks off the next week and we just realized we don’t own the domain name [used in the campaign]’…At this point the client is smart enough to ask the ad agencies what the internet strategy is, what the domain name is, etc. The ad agencies can’t just sweep this under the carpet anymore. This is starting to happen and that’s why I don’t think it’s a bubble. People really need these domains.”
Schilling said, “Some of [this market] has a very bubble-like flavor to it. However, there is a counter dynamic going on. Regular people are starting to decide they need a web site. There are definitely bubbles going on in the world, but you also have an industry maturing.”
In other words, domain prices may be going up while the overall financial markets are shaky, but the demand for domain names will keep growing.
I have personally sold at a couple of my domains recently to ad agencies. The comment made about ad agencies not being able to get around including a good internet campaign and successful domain name for their customers campaigns is right on the money. Thanks again Andrew for the coverage of today’s roundtable.
Rob