Marchex and Monopoly of Domains - Best Blogs Asia
A conversation with Marchex, got me thinking about domain ownership and the monopoly that firms like this run.
I never dealt with Marchex before and think they only became known in the mainstream with their purchase of domains from Yun Ye. They operate 100,000’s of thousands of popular domain names and are a real heavyweight in domaining.
About Marchex
Based in Seattle and run by Chairman, CEO, and Treasurer – Russell C. Horowitz, President and Director – John Keister and COO – Peter Christothoulou. Back in 2004 they made the huge purchase of $164 million portfolio of Name Development (more commonly known by domainers as the Ultimate Search portfolio), a collection of over 100,000 domains ranging from Remodeling.com, BayAreaHotels.com, Beijing.com and Cuisine.com.
They decided that they could make more money by providing some level of development with content aggregation as opposed to their old parking model. To do that, they acquired Open List in May 2006 for $13 million. They also run a propriety search marketing product is called Marchex Connect. In addition, the company offers pay-per-click, contextual, and call-based advertising services.
Marchex Income Statement
I see their operating costs are more than their profits. Their financials are:
2008
Revenue ($ mil.) – 146.4
Gross Profit ($ mil.) – 80.4
Operating Income ($ mil.) – (173.7)
Total Net Income ($ mil.) – (127.9)
2007
Revenue ($ mil.) – 139.4
Gross Profit ($ mil.) – 68.5
Operating Income ($ mil.) – (0.5)
Total Net Income ($ mil.) – (1.5)
Bad experience with Marchex
I came across Marchex by accident, I was interested in a .com domain name which wasn’t popular but thought had some personal value. I found out the contact details from who.is and sent off an email. I was contacted shortly by a representative of Marchex called Riccardo Soff where the conversation went as follows:
Me: Hi, how much for **********.com? I want to offer you 1000 USD. Regards
rsoff@marchex.com: $50,000 USD for this domain.
Me: Ok please send over the stats and other info to justify this price? Thanks
rsoff@marchex.com: Per company policies we don’t disclose revenue and stats. Thanks, Riccardo Soff
Me: Ok noted. But as a potential buyer, how can 50k be justified as I can see it’s not ranked in google or is a popular keyword? Regards
rsoff@marchex.com: This is the asking price, I don’t have to justify. If you are interested please feel free to put in a certified offer….(and so it went on)
Summary
I’m a potential customer and curt replies doesn’t reflect a company who make their living buying and selling domains or with replies like “I don’t have to justify…” when I asked a relevant question.
Of course a price needs to be justified if you are going to buy it. The domain market isn’t regulated but comparable prices can be made to other domains bought/sold.
My point is what if all employee’s of business acted in this fashion? Perhaps they thought I’m probably one of many potential buyers who couldn’t afford this domain but I thought “all leads and enquiries must be followed through until it’s conclusion”, is a practice I follow and has led me to be successful.
In order for a domain to be priced accordingly, the value should be ranked on:
- Popularity of keyword – how often is it searched
- Existing presence on the web, any searches made
- Comparable domains and prices
- Potential value, will this keyword be searched more/less in the future
Conclusion
Marchex do run a monopoly, since they own a lot of premium single keyworded domains which obviously generate a lot of revenue from being parked or just sitting on the server waiting for someone to contact them.
Their customer service seems pretty poor, coming up with a price out of “thin air” only makes the buyer angry, which can’t be good for the company and can lead to articles such as mine which are questioning the company’s practices which all leads to bad PR.
Also since Marchex has developed sites which actually answer the question or satisfy a visitors curiosity, this leads them to not make any money rather than by clicking ads on a parked page- so why would a business want to do that? Of course they are looking for high organic rankings and traffic boosts but as reflected in their Financial Statements and declining stock price, it means revenue is declining.
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3 Replies:
Marchex now tries to sell names via http://www.mdnhinc.com but is failing to sell many. The management has standard template response they send to people saying start bidding above $50,000.
With such massive losses it wont be long before their whole business collapses even further owing even more than they owe already.
Businesses that dont make profits dont last long!
Not sure if you are an employee of Marchex, but I thought domains are an investment. With the link up of Marchex’s local adverts on each domain, at the minimum all domains pay for themselves whilst the single keyworded domains just increase in value. My 2 cents…