Sky Dayton continues to have a productive post-Earthlink afterlife:
The search function continues to create a lot of value, sometimes in places that fly under the radar. Last week, the WSJ reported that business.com may be sold for as much as $400 million:
Business.com for $400 Million? Craziness? Not so fast
The initial take on news that business.com is on the block for between $300 and $400 million, reported in today's Wall Street Journal, makes for a great headline. And the quick reaction is, Wow, I thought domain prices were crazy in the '90s. But hold on. Yes, the name is powerful. But my guess is business.com -- just as a name -- would fetch, dunno, $7 to $10 million. That's because it's a powerful, generic name -- but not just one that people will type directly into their browsers, but one that could so easily be built into a business. The name does the marketing -- just like sex.com markets, well, you get the idea -- but Jake Winebaum and Sky Dayton have in fact built business.com into a business -- a well run, lean and mean Internet business that capitalizes on paid search advertising (something barely in existence when they bought the name in 1999).
The Journal says Business.com had 2007 “earnings before interest, taxes, depreciation and amortization of about $15 million,” which means the price tag is super rich. But that valuation isn't for the name. It's for the directory, the search capabilities, the lucrative business market. Om Malik, my former colleague, has a smart take on the business (GP edit: See below) on his blog, as does ValleyWag, which explains how the valuation says more about the economics of the search economy, thanks to Google (GOOG) than about domain names themselves. On the other hand, as top domainer Frank Schilling points out on his blog, what business.com has done is really easy to duplicate -- so, he argues, the price is steep.
Meantime, if a deal goes down, Marc Ostrofsky, the guy who sold the name in 1999 and ended up with an undisclosed amount of stock in business.com, is one happy man. He won't say how much he'll get but it'll be a heck of a lot more than had he stuck with $7.5 million in cash. "I just learned about this this morning the Journal," Ostrofsky told me. "Needless to say, I'm going to make a lot of money if this happens. I'm having one great day." (An entertaining aside: My employer, Business2.0, had a chance to buy the name back in 1999, but wouldn't pay what Ostrofsky wanted.)
blogs.business2.com
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Business and a dot com, Sales higher than reported?
Written by Om Malik
Friday, June 22, 2007 at 9:09 AM PT | 7 comments
Updated: Jake Winebaum is a fellow Time Inc. refugee and we have talked in the past about everything from missed opportunities at our ex-employer and of course Business.com. He joked about the jokes about his and Sky Dayton buying Business.com for $7.5 million back in Bubble 1.0. Well, if you read this morning’s Wall Street Journal then you can guess, who is having the last laugh. Many are focusing on the domain Business.com, missing why his company would fetch anywhere between $300-to-$400 million in an auction.
“It’s not simply a URL that is being sold, there’s an actual business there ” writes HipMojo. Absolutely! Anyway I dropped Jake a note this morning to chat about the ensuing brouhaha. “Unfortunately I can’t comment on what you read,” he wrote back in a quick. What I can tell you is the company doing great.”
According to the Journal, Business.com had 2007 “earnings before interest, taxes, depreciation and amortization of about $15 million” and their traffic grew “50% in the first quarter of 2007, compared with the year earlier.” The $350 million price tag would value the company at about 24 times cash flow.
However we have learned that revenues are in the $50 million plus range with profits in low teens. So from that perspective, the deal would be seven times sales.
Business.com has built a yellow-page equivalent of resources and other related stuff that targets small to medium sized business. It has built up affiliate relationships with everyone from broadband providers to stationary sellers. This directory backend is served up on sites like Inc. magazine’s website. (We discussed working together, but frankly I couldn’t get my act together.) Business.com’s business is not exactly the kind that is going to end up in the pages of Portfolio magazine, but it is as mainstream as it can get. (Paul Kedrosky was talking about mainstream web yesterday.)
Who could be likely buyers for this company? Traditional media companies, of course. But it would be strategic fit for Yahoo, which already has a big exposure to the SMB segment. If the deal does go through, it would be a big payday for Benchmark Capital, one of the backers of the company.
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