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October 17, 2007

Comments

GregoryZ

Interesting idea. How does an investor understand the valuation, though? It would be easy enough if a domain was recently purchased. For example, if cowboys.com sold for $300,000 and the owner offers one share equal to 1% of the name, then I guess the "IPO" price could be $3,000 per share. But, what about a domain that hasn't sold in a long time? If I offer $1 for 1% of love.com and no other offers come in, would I get it? That's my challenge with domain name portfolios in that the underlying valuations are hard to pin down and it's all apparently based on speculation.

***FS*** Granted there is specualtion in portfolios, but typically you can peg a value to the cashflow generated via advertising or lead-gen.

Tobias

Gregory,

Two things...

First, I agree that domain valuation today is more art than science. There is no clear valuation method and multiples are typically only part of the valuation. One of the things I would hope for in an Exchange is transparency on this.

Second, I believe the market is smart enough to figure out valuation given the tools of an Exchange. Therefore, our approach is that we let the market determine the value. Currently in the Beta, the domain owner sets the value, and if it's unrealistic, noone will buy or trade in the domain. For the launch, we will have a "pre-bidding" phase (book building in IPO) where investors can partake in an auction to determine the initial share price. We will also have "brokerages" that help determine a domain owner a fair value (ie one that investors are willing to buy in).

Does that make sense? If interested, drop us a line at team@fusu.com and I will make sure you get an invite to the Beta.

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