What Should Microsoft Do With That $46 Billion?: How About Buy Domains

So now that Microsoft’s attempt to buy Yahoo has failed (at least for now) what can Microsoft do to take traffic away from Yahoo and Google and move it to MSN?

How about buy domains.

More specifically buy large domain portfolios and redirect the traffic to MSN.

Microsoft was willing to spend $46 Billion for Yahoo.

By all accounts it would take well over a year to get regulatory approval for a deal with Yahoo, which will cost tens of millions more and then most lightly 2-3 years to truly integrate Yahoo into MSN. The total acquisition in cash, stock, time and costs might top $50 billion.

If Microsoft went out and took down some of the publicly traded domain companies, and the top 20 domain portfolios what would it cost them?

Certainly less than 5 billion.

They would permanently take traffic away from both Yahoo and Google and place it directly into the MSN channel forever.

Add a parking company and you have accomplished the movement of market share in favor of Microsoft at a fraction of the cost of Yahoo.

Dark Blue Sea for example, which owns reportedly 600,000+ domains of their own, generates seven figures for parking domains and has it own hosting company, has a market cap of less than $30 Million based on today’s trading price of $.35.

Marchex.com which owns hundreds of thousands of domains has a market cap of $500 million.

Then there are the major private portfolios (including ours) that generate substantial revenue that could be purchased and the traffic switched over to MSN and away from Google and Yahoo, not just for today or tomorrow but forever.

As we all know, It was reported a couple of years ago that one privately owned portfolio accounted for 1% of Yahoo traffic alone.

By taking out a few public companies, and some of the top privately portfolios could MSN take 5% traffic share away from Yahoo and Google and get MSN into the 15% share range?

I think so.

Just the perception of MSN market share gaining at the expense of  Yahoo and Google’s share,  would get the attention of the media, advertisers will slowly migrate over, and you start to have something.

Not a bad way of spending a fraction of the money Microsoft is saving by not buying Yahoo and getting into the game.

Finally its always been a logical disconnect for myself and many other domainers that Yahoo and Google are willing and in fact pay domainers for their traffic every month, thereby in essence renting the traffic, but unwilling to buy the domains and thereby buy the traffic and own it forever and deprive their competitors from the traffic.

For just a small investment for a company like Microsoft, they could effectively pick up 5% or more of market share, own it forever, stop making lease payments to domainers for the traffic and take the traffic away from its competitors.

Seems like a no-brainer to me.

Comments

  1. Tony says

    I thought the same thing a few months back. If MSFT spent even just $20 billion buying up domain portfolios, they would control the internet. It is well known that 15% of people do not use any search engine but direct navigation. 25% of the other 85% that do use search engines type in “keyword.com” which most of the time gets them directly to that domain. By my estimation, a third of all searches go directly to a domain name and not to a search engine. This is the only viable way to battle Google for MSFT. Will they ever realize this? Even if they just owned one portfolio on the order of Kevin Ham’s or Frank Schilling’s, they would cause a dent in SE wars.

  2. Ed says

    Why start a war you can’t win?

    let’s say MSFT decides to buy a domain portfolio or two. at what current multiple do you think they could convince investors to do it at considering the “migration” risks? surely we all know MSFT does not have the advertiser base to capitalize on domain traffic the way YHOO and GOOG can. further buying a domain portfolio or two would not give MSFT much of an advantage over GOOG or YHOO. MSFT could not pay the multiple for the domain portfolio that GOOG & YHOO could. why start a war you can’t win?

  3. says

    On a second thought, OMG!

    Imagine, what MSFT will have to deal with when they own tons of domains that are even remotely closer to all the TMs in the world! (with Bills like Snow every domain is sensitive as we know)..

    That is why we need to think atleast twice before spending $46 Billion..lol.

  4. admin says

    Guys

    No one is suggesting that MSFT spend 46 billion.

    I think they could do the 10% swing for 5B.

    They would stay way clear of any TM and I assume adult and gambling.

  5. admin says

    Ed

    It’s not a war.

    It’s a strategy whereby MSFT can take away traffic from Yahoo and Google permanently and put it in its own network. I think 10%-15% swing for 5 Billion is very possible.

    If MSFT comes correct to domainers offering stock and cash, they could get it done and be much further ahead of where they sit right now with 5% of the market.

  6. says

    This was actually covered by Steve Forbes and a panel on the Ludlow report yesterday.

    Noted: the key difference is that Yahoo has relationships and domainers have ships passing in the night. Each email address is worth $30, plus the beauty of Yahoo to MS was not just traffic but people hooked on the sports and other channels who may stay even if only billed $2.5o a month. People who will be pre-disposed to buy software as a service when operating systems are more web-based.

    Remember buying Yahoo you put up banners and make a lot more then hoping for click-troughs or having to justify the fraud etc. It’s like putting newspapers in front of hotel doors and calling it bonus circulation.

  7. Ed says

    Yes it is a strategy but it is also war.

    BTW, I’m not trying to start a war on your blog :)

    I’m with you, I want to see a major network come knocking on a domainers door, but I believe it would start a war just like Google’s Purchase of DoubleClick did. What followed were multiple ad network buyouts by MSFT, and Yahoo.

    I, like yourself believe a domain portfolio or 2 or 3 would be a great investment for MSFT, YHOO, or GOOG; however I do not see it happening. With all the consolidation in this industry it is still relatively fragmented. By this I mean no one company or individual has enough market share. Please correct me if I am wrong, I would love to see some stats.

    I also believe that some of the bigger companies are flat out not interested in selling for different reasons.

  8. says

    Microsoft should simply spend 5 billion fractionalizing with the best domain portfolios. That is their forte. They do not want the burden of building out each of the internet’s best names but would surely want a piece of those that are doing it. MS needs to start partnering with the domain industry in strategic ways. I believe someone there must be considering it. They are too smart to be dropping that ball. I would hate to think they would stall out like IBM did 20 years ago.

  9. admin says

    Michael

    I don’t think a public company would spend billions of dollars for fractional domain interests.

    The 5B they could spend would net them several public companies, at least one looking to go public and many of the top privately owned portfolios, free and clear with all traffic pointed to MSN and all revenue derived staying in house.

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