Name Media Does a Pre-Show Sound Check...

Colin Pape sends link (thanks Colin!)

Hey Frank!

Here's an article you might want to cover - it's one of the better ones I've read - full of meaningful facts and figures:

http://www.iht.com/articles/2007/05/27/business/ecom28.php

Good eye Colin..  I was just winding down for the Memorial Day eve when you sent this.  Very well written article with lots of great info.  These guys definitely have all the right pieces: Name brand CEO, Goldman is the banker, Summit/HCP are sterling backers. They bought the foundational elements of the business when they acquired Mike Mann's Buydomains in 2005 (which was one of the 5 great legacy domain name portfolios). If the 80mm rumor number is correct, they got a smokin' deal. This company has worked very hard to build out and position themselves.

If I read the story right, 60mm rev with 40% margin gives about 24million EBITDA. Nice, but I'm curious about the percentage of EBITDA that comes from name-sales and arbitrage (and the sustainability of those two components long-term). I have bought great names from them relatively cheaply, so have other people I know -- and I have not seen the company compete at the expiring auction watering holes in a long time. It's not possible to replenish high quality domain names from the available pool like we could in the old days. Once meaningful names are gone they can buy 'stuff' to backfill the sold-slots, but this business is both "art" and quantitative science. 10 average names with equal clicks/traffic do not always equal 1 good name in terms of intrinsic value. Also, the story intimates they are carrying 120mm in debt.

It's possible the co. is aggressively paying down their debt, hence the muted margin number. I say 'muted' because debt-free pure-play name portfolios can show 70-80+% margins unless they're spending money growing, or doing a lot of keyword to keyword arbitrage (buying traffic at GOOG to sell to YHOO or reverse). Arb is a gross builder but a margin vacuum. Renewals on a longtail portfolio like this are heady too... about 5mm a year and climbing. Still, 40% margins look astounding compared to most other companies in the world.

Reinvent has a boatload of great names, doesn't sell a thing and intimated .cm agnostic EBITDA of 70+mm, Oversee is mainly a redistribution play, and is running well north of 100mm a year in revenues. They haven't spoken to their EBITDA number, but I'd guess it's in Reinvent's neighborhood.  So there are bigger potential plays in the space - but as far as 'next to get public', Name Media would be my bet. Should be a home-run.

I even like the name ;)