I’ve been following Hecta since they went public in London last year and I spoke with Clark Landry regarding their plans a few months ago. Now, they’ve made a few big purchases of domain portfolios, notably a 60,000 name group bought for $1.42 million US. or about $24 per domain. They project a gross annual revenue of about $750,000. from these domains or an average of $12.50 annually per domain.
Clark told me their business plan was to look for domains that were underdeveloped due to lack of cash or bandwidth to do so. This purchase, even without any idea what domains it includes, looks like a no-brainer. I’m guessing the owner was looking to cash out but selling for 2x revenue doesn’t look that great to me. As has been pointed out by others, domain registrations are going to eat about one third of the revenue each year. I’d guess Hecta will cherry pick the good domains and offload the rest, especially if they are going the development route. It will be interesting to learn more about their approach.
A sale like this should be an increasingly rare event in the domain world going forward. Until recently domainers have looked like land speculators, grabbing swathes of swampy land, marginally improving it and selling off parcels to the next wannabe magnates. As the domain world wakes up to the fact that being a developer is where the big money is they’re going to be keeping the choice pieces for themselves and building luxury condo towers on them. Instead of a nice 300% return (like the Hecta deal), you’re going to be looking at much bigger returns on much smaller portfolios, IMHO.
If this is the case we could see a flattening of the resale market for marginal domain names as big portfolio holders dump the crap. While we don’t sell much, I do watch the auctions, Sedo and Afternic, etc., and it looks like this is already taking place. Personally I’d rather have one strong dot com domain than 1000 oddball ones. The definition of a ’strong’ domain for me is one with an obvious development roadmap and a high potential for monetization.
March 19th, 2008 at 2:11 pm
A big agree with what you said here…I think large portfolio deals will be few and far between as time goes on only because there will be less of them around as the industry gets rolled up into already existing companies like oversee and marchex etc
March 19th, 2008 at 2:33 pm
Until everyone sees the list of 60,000 or at least a 1k sampling, who can judge what they did or did NOT do.
Then again I am just a domainer with not much experience.
March 19th, 2008 at 3:15 pm
Do you have any idea of what types of names were in this portfolio?
March 20th, 2008 at 7:06 am
GREAT and VERY informative post.
WELL DONE