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Acquisition Opportunity for Yahoo or Google- Marchex
Last time I analyzed CNET’s individual assets, the company was acquired 4 months later. Now, amidst the current economic nightmare, there is a fresh new opportunity to grab a gift – Marchex (MCHX). Yahoo, who’s recent conflicts have left many asking for Yang’s head and who’s stock has lost almost 50% since failed negotiations with Ballmer, has a small opportunity to vindicate themselves.
Of course, there’s also Google who needs to continue increasing their revenues in order to support their generous stock PE. Although I would insist that this is a more logical acquisition for Yahoo! to build themselves into a more attractive position for Yahoo! to be acquired, possibly still by Microsoft.
So, what does Marchex bring to the table?
High quality traffic and prime Internet Real Estate.
By its own, Marchex is priced slightly below their current value. However, when you take Google or Yahoo’s advertiser base and traffic sources and fuse it with Marchex’s high quality domain portfolio you get a multiplier effect.
Marchex has made two brilliant moves:
1. Spanish domain portfolio acquisition
This portfolio contains over 100 of the most attractive Spanish domain names and was calculated to generate more than one million unique visitors per month. Of course, these are mostly visitors coming straight to the sites, because of type-in traffic. Take a look at the jewels:
mujer.com (women.com)
fotos.com (photos.com)
deportes.com (sports.com)
salud.com (health.com)
peliculas.com (movies.com)
mascotas.com (pets.com)
futbol.com (soccer.com)
cocina.com (kitchen or cook.com)
tarjetas.com (cards.com)
dietas.com (diets.com)
computadoras.com (computers.com)
The whole list is found here http://www.emediawire.com/releases/2007/5/emw527846.htm
The value of these domain names are like a slow curve that quickly accelerates exponentially as the Spanish market (Spain, Mexico, Caribbean and South America) online advertising solidifies. One must understand that this market has been extremely slow to develop, mostly because of the number of computers available in each household and lack of understanding from old school marketing executives. However, the panorama is changing quickly and will fuel advertiser dollars to the ‘net.
The Spanish domain portfolio could be easily worth $500 million to $2 billion in a 5 year window, depending on the development of all these domain names into fully usable content and social portals.
The second source of value in Marchex is their 2004 acquisition of UltSearch’s domain portfolio.
In this portfolio, there are over 100,000 domain names of high search traffic value. There are also a few generic jewels in the mix like beijing.com, debts.com, and remodeling.com.
It’s hard to value the whole portfolio and I suspect that most of the names would probably not be of any significant worth. However, assuming even 1% of the names are of the quality of debts.com and beijing.com would make the portfolio highly attractive.
I wouldn’t doubt that this portfolio had at least $100 million in value (Marchex paid over $150 million a few years ago for the portfolio).
Finally, someone over at Marchex decided to accumulate zip code domain name. Wrap them up, put a bow on top of them and sell it for a few million to some telephone company still figuring out their online strategy. I’d also garage sale the auto content generation technology.
Marchex is currently priced at $300 million. Year-to-date they are down almost 30%. This is exactly how much it is worth.. a 30 to 50% premium on its current price.
CNET Acquisitions
For the past several months, I have been watching and considering an investment in CNET Networks, precisely because of its attractiveness of individual assets, which if spun off could suggest a much higher total worth than the current $1.3 billion. However, upon closer inspection of the individual parts, I am still not convinced that the sum of its parts, under current conditions, is worth more than its 1.3 billion. CNET is currently carrying too much fat and producing mediocre returns on their prime jewels. Take for instance News.com, which as suggested by the NY Times produced in October a mere 6 million page views, compared to 8 million page views produced by a small group of bloggers with minimal costs over at TechCrunch.
The key of course, is finding buyers for CNET’s crown jewels, which are:
- TV.com – This is currently a site which alone could be worth more than CNET’s current market cap, but the focus of the site is its main problem. TV.com is aimed at providing a TV guide resource – big mistake!
Instead, TV.com could become the place to go for TV watching, think YouTube or Hulu. Capitalize on the millions of confused visitors coming in from the highly marketed .TV extension. Strike deals with media companies to stream television through TV.com. Stream everything under the sun! Sell the idea to Mark Cuban, sell it to Murdoch. Try to get a link from future generation television sets that are integrated with wireless internet, so that TV.com is the link to online television. How many people are looking to buy a TV and just type TV.com? Have a section in the site for TV purchases, cable subscription services.
The current site is probably 10 to 15% of the traffic and revenues it could achieve.
My current price – $100 to 500 million. Future worth with minimal refocus – $1 to 5 billion.
- News.com – When you type News.com, the first thing you see is technology news. Get over it. If I want technology news, I will type TechnologyNews.com, Technology.News.com, or TechCrunch.com. I don’t even want to know how many of CNET’s 2,600 employees it takes to run this charitable venture costing investors $16.65 million last quarter. Again, as TV.com, News.com is being used for less than 15% of its capacity.
When I type in News.com, it should be news about everything. I want to see videos of what’s happening around the world. I want to get international perspectives for what is happening in the war in Iraq. People should find ALL possible resources on news information and be able to interact and contribute. Oh so many possibilities!
My current price – $50 to 300 million. Future worth – $0.5 to 1 billion.
- Download.com is fairly well developed and should fetch a good price. I don’t have specifics on how much it costs them to offer what they claim to be a, “a rigorous testing process to ensure it is safe and spyware free”. Unless this rigorous testing process is subsidizing a considerable number of employees, an automated system should not represent a considerable cost. Advertising money here should be flowing comfortably in the black.
My current price $50 to 150 million.
- Search.com – Wow, these people really knew how to pick their names. However, as Google becomes a household synonym for “search” I am less confident in this domain than what I would have been five years ago. I would assume that this is a rapidly depreciating asset and should have been shopped around much earlier. Sell it to Sahar Sarid for his search venture Assista. I am sure he’d appreciate the value it can bring to own the direct synonym to Google in his quest to take a bite of that space.
My current price $10 to 20 million (perhaps more depending on current traffic and revenue numbers)
- Chat.com – Give me a break! This baby redirects to cnet.com? Yes, it should be a crime punishable to death. Chat.com has no home of its own. I’ve personally shopped around to buy chat ccTLDs and have already developed one into a chat site. These sites are great, because they are cheap to build and to maintain, and user loyalty is huge. Chat.com is a dream domain with immense potential. I want it.
Suggestions for this site are obvious – build chat channels and capitalize on the type-in traffic, which will serve as the commencement of an avalanche of visitors. These people spend 20, 40, 60 minutes straight in a page. Even at $2 CPMs, this is one site that could produce millions. Instead, old grandpa CNET reasons – if they type in chat.com it must be they want to read technology product reviews! Shame on you CNET.
My price $300k cash, right now! OK, seriously – $5 to 10 million – and the 10 is pushing it, because there’s no community. This is just a domain name purchase.
Future worth – $10 to 50 million easy.
Mp3.com – $5 million
GameSpot.com – $4 million
ZDNet.com – 3 million
TechRepublic.com – $2 million
mySimon.com – $1 million
UrbanBaby.com – $500k
Chow.com – $300k
As you can see from current conditions, a $1.3 billion market cap is reasonably priced. Yes, many of us see potential in a much higher worth, given the properties they own, but right now there is no bargain investment in CNET unless you have the power to enforce radical changes to current management or have faith in Jana’s capacity to push for that change.
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