In the final issue of Business 2.0, Paul Sloan covers the Marchex story. In addition to providing a great history of the company and its founder, the article also mentions Open List. This is the technology that Marchex (MCHX) uses to pull together relevant content from around the web to automatically seed 100,000 different websites. I had mentioned in an earlier post that the resulting websites don't seem all that useful.
The article also brings forth a comparison of the profitability of a domain parking company and Marchex. Marchex's largest acquisition was for a portfolio of domain names that made $18 million a year of profit on $20 million of revenue. As a whole, Marchex recently made $220,000 profit on $134 million of revenue. If Marchex's development strategy does not start to yield incremental traffic and revenue, all they have done is created a domain name parking company with way too much overhead and a compromised revenue model.
A recent article in Forbes on Demand Media, presents an interesting contrast and an alternate model for development. Demand Media recently raised an additional $100 million of financing at a $1 billion dollar valuation. The company has also acquired a huge portfolio of domain names. As opposed to Marchex's strategy of thinly developing thousands of websites at once, Demand Media has been focusing on a small group of 50 highly targeted websites. They have grown the sites by adding social networking elements and real content. Visitors to the sites find engaging information and have a reason to keep coming back. As long as they can successfully replicate this model across their domain portfolio, I think they've found the winning formula.
Friday, September 28, 2007
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1 comments:
Your post has merit. The jury is still out on Marchex and their strategy. Your commentary regarding Demandmedia having more "web 2.0" in their recipe is accurate.
What you have COMPLETELY missed is the fact that Marchex ACTUALLY reported $38.3 Million of earnings before interest taxes and depreciation in the last 4 quarters(EBITDA). Go CHECK FOR YOURSELF!
From the Forbes article it states Demandmedia "expects to gross more than $100 million this year, half of it from ads and half from subscriptions and domain rentals. Earnings before interest, taxes and depreciation could reach $30 million. (EBITDA)
As you can see on an EBITDA basis (which is the basis in the Forbes article) Marchex is doing a comprable job regarding earnings.
Demandmedia has been around for 18 months...Marchex 4+ years. Demandmedia must be given kudos for there speed in development. But Marchex is by no means in a much lower league (based upon EBITDA).
Marchex has recently lowered guidance associated with EBITDA for full year 2007 to $29 to $33 Million.
Marchex is quietly building traffic (much of it organic or thru algorithmic search engine traffic). The Voicestar acquisition will become increasingly important in late 2008 and beyond. "Pay per call" / "click to call" services may become an absolute gold mine as the holy grail to bring offline service based companies to leverage the ONLINE efficiencies.
Good Luck to both Marchex and Demandmedia.
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