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Domain name media industry is huge in the US and Europe. I have been curious about this topic. Ravi Venkatraman of eClickSmart Inc, who is one of the leading Indians in the domain business, helped me understand this a little bit. This post is to throw light on the domain business both within India and outside. Ravi Venkatraman and Joy Antony, a Gulf-based NRI who owns some 1,000 domain names, gave me a lot of dope on this business which is the basis for this post.
Why now? It’s simple. Internet pioneers like Richard Rosenblatt (who was the chairman of Myspace.com) has ventured into this game. In April, he floated a company called Demand Media, which believes in the philosophy that “content creation and publishing costs are immaterial, traffic is acquired for free, and advertising sales becomes automatic, recurring and predictable”. Demand Media raised some $120 million in VC funding from the likes of Oak Investment Partners. The company has acquired over 150,000 domain names. It claims 25 million unique visitors per month through its niche content web sites.
Besides Rosenblatt, there are other big names too who have gotten into this business. Primedia/IDG CEO Kelly Conlin joined as the CEO of a relaunched domain name firm called NameMedia. It was earlier known as BuyDomains.com, a company founded in 1999 and acquired in 2005 by VC firms, Highland Capital Partners and Summit Partners. It now employs some 75 people, and owns 650,000 domain names.
So if big guys are getting into it, then what is this business all about? How big can it be? (For those who want to know more, here is a good post on the domain business.) A domain company owns hundreds of URLs (such as Photography.com or Employment.co.in) and they populate these sites with search ads. So if somebody types in a word, say “Photography”, on the browser instead of the search engine, then they are directly taken to one of these “fake” sites. They are likely to click on the ads present on this website which will add to the revenues of the domain company. It’s also called Type-in-traffic.
Is it a big business, you would wonder. It’s actually becoming a big business. One sign is big boys like Rosenblatt and Conlin have entered the industry. But here are some hard numbers.
According to an article in Business 2.0, the domainer business will account for about 8 percent of search revenues, or an estimated $650 million, this year. Interestingly they are not the websites which visitors actually wanted to go. They accidentally land on a website like Photography.com (which has no content but search ads) and click on the ads, thus contributing to the revenues of the domain company.
Now these companies are different from cybersquatters. They only own generic names like Softdrinks.com (a generic name) as opposed to Coca-cola.com (a trademark domain name). But these generic domain names can be highly valuable. Recently, Diamond.com was sold for $7.5 million. And if you have hundreds of such domain names, your company can be valued in hundreds of millions (the list of some top domain names being traded here). For instance, in November 2004, Marchex acquired the generic domain name portfolio of Name Development Ltd for $164 million, predominantly for its 100,000-plus domain name portfolio, which generated 17 million type-in traffic visitors each month.
Tomorrow: The Indian domain name scenario.