Domain Name Bundle Sell for $155 Million

Jeff Berg
SEATTLE — Internet advertising startup Marchex Inc. has closed its $164.2 million purchase of various assets from Name Development Inc., a company that specializes in direct navigation markets and allegedly controls domain portfolios belonging to domain name tycoon Yun Ye of Ultsearch.

Yun Ye, who maintains a shadowy presence on the Internet, aside from his flashy pay-per-click pages that he places up on his army of domains, made headlines in 2003 when he managed to snap up Microsoft’s Hardware-Update.com, which was featured in various Windows error messages, as soon as the domain expired.

While Mark S. Peterson, Marchex’s vice President of Public Relations, would not disclose specific details of the transaction, he did say that the total number of domain names owned by Marchex was now more than 200,000 and that the acquisition might bring with it a large amount of direct navigation traffic.

“We can’t really guess how much traffic it will bring,” Peterson told XBiz. “Our internal estimates [for the Name Development portfolio] included unique visitors for November 2004 at more than 17 million unique visitors.”

Name Developments, which specializes primarily in direct navigation, operates by purchasing commonly typed or mistyped domain names and then places PPC advertisements on their pages.

According to Marchex, the direct navigation market amounts to about 10 percent of the global search market, estimated at $4.5 billion in 2004 and expected to grow to $13.1 billion by 2008.

“For us, it’s not the quantity of the domains, but the quality of them and the quality of the traffic we get from them,” Peterson said. “That was really the impetus behind the acquisition.”

Recent research conducted by WebSideStory indicated that roughly 67 percent of Internet users arrived at websites by using direct navigation during September 2004, an increase of about 14 percent from three years previously.

“The use of direct navigation as a means to find products, services and information on the web has been, and will remain, a valuable and important navigation tool for Internet users,” said Russel C. Horowitz, Marchex chairman and CEO. “We look forward to participating in the evolution of the direct navigation market and working with many of our current partners to drive continued growth in this segment.

According to Peterson, they decided to purchase the domain portfolio for such a large amount of money because of the large amount of commercially viable terms that were contained within it – an amount which the company hopes will allow them to expand further into the direct navigation market and bring the company traffic that they own.

“We’ve been a search engine marketing for some time,” said Peterson. “This is really one of our first steps into direct navigation. From here, we’re going to continue to build out the assets that we’ve acquired.”

The acquisition comes scant weeks after Snapnames.com auctioned off the voyuer.com domain for $112,100, the highest price ever paid for a misspelled domain name, according to domain industry publication Domain Name Journal.

“Those Marchex guys are brilliant,” said one Search Watch commentator. “They basically bought some powerful generic names and phrases for a song and now they own that organic traffic forever. They capture Internet users like a sail or a kite attracts wind and moves a ship forward. It is pure, simple and wholesome as the day is long.”

Marchex, which specializes in connecting consumers and Internet merchants through a variety of different technologies, was considered one of the three most successful public offerings during 2004, with its stock price more than doubling after it went public.