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Valleywag
The $300m price-tag for Business.com is presented, in the Wall Street Journal, as evidence of the extraordinary inflation in domain prices. Business.com was, when bought in 1999 for $7.5m by Jake Winebaum and Sky Dayton, the most expensive dot-com name to be traded; the company built on that instant brand is now worth 40 times as much. But the valuation of Business.com, which is being pitched by Credit Suisse, says more, in fact, about the extraordinary economics of search engines.
business.com
The Business.com site is little more than a rebadged version of Google Adwords, serving the search engine's text ads in both the main column of search results, and the sidebar, alongside a few perfunctory business listings. Business.com pages are so useless that the site is its pages don't appear in the Google index, but the search engine's text ads still fund the company. The company's pitchmen claim earnings will hit $15m this year, making the $300m pricetag quite reasonable, at least by the degraded standards of this internet boom.
So, what's the moral of the story? It certainly helps to have a domain that web newbies are likely to type into a browser address bar. And those are the internet users most likely to click on text ads. But here's the bigger lesson: search is such a lucrative business that fortunes can be made by even the most cynical of operators, with the thinnest of products, and the tiniest slice of the market.
And that explains why a search engine like Barry Diller's Ask can spend $100m on a widely-mocked advertising campaign, and probably still consider that a good investment. Or, also, why Jason Calacanis' Mahalo, seemingly foolhardy in taking on incumbents like Wikipedia and Google, should not be written off. I had rather have money in one of the losers, in search, than one of the winners in most other internet fields.
Comments
There is a tendency for a rising tide to lift all boats. Many of the most attractive opportunities today remain taking on a niche slice of search.
Here's another way to make $15 million a year on an 'investment' of $300 million. A savings account.
Extra Bonus--you don't actually lose your initial investment!
I'd rather be bearish about the whole thing.
Call me a contrarian - guilty as charged - but I think that the revenues from internet advertising firms are badly exposed to the ad market cycle. I would argue that most bets on net advertising by marketing management within their clients are speculative at this point and that the jury is out.
More expensive money/recession could take a lot of the air out. So could any trend of internal analysis that determines net ads are ineffective sales drivers. At that point, you're going to see some of these "enterpreneurs" get scared and sell low to more long-term investors, and it's going to look less and less like the Wild West every time the circle comes around.
What a fantastic and brazen example of adsense spam! I'll bet 95% of adwords advertisers are not aware they are paying for ads to appear on sites like these (adwords has "content network" on by default). Advertisers who use adwords thru a third party are even more clueless -- to them it's just a black box.
There are thousands of (less successful) sites like this, all being goosed by adsense clickbot farms.
I realize many won't view this as "black hat" behaviour (after all, the advertiser must determine if they receive net value from the adwords system), but as an advertiser myself, I've always felt this was sleazy, and that google makes it very easy to "scam" their system.
I'd be interested to hear from adwords advertisers (not adsense publishers) who think otherwise.
by the way, given that csfb has been trying to sell this biz for at least 2 months, and now leaking it to the wsj, presumably not flying out the door...
It wasn't always AdSense spam. Until the last year or so Business.com was a reasonably useful directory of categorized business sites. At some point they chucked that model in favor of a domain parking strategy. There may still be non-paid listings there, but you have to scroll down the page forever to find them. And they clearly want you to click on an ad before you get there.
It's an example of the new approach taken by Demand Media and other venture-backed domain monetization plays trying to move the business beyond the parked page. The new model is to surround the ads with "content" but make sure the content is cheap and/or free (i.e. buying up businesses based on user-generated content) so it doesn't erode the PPC margins. Some of the other players in this niche have tons of generic names, and will eventually sell for far more than $300 million.
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