Why Sex.com May Not Sell In The Foreclosure Auction
As Elliot’s Blog discovered yesterday, the domain Sex.com is heading to a foreclosure auction on March 18th.
However, just because the domain name is heading to auction, it doesn’t mean the domain is going to sell.
For one this is not an absolute auction where the highest bidder gets the domain.
Rather, the auction notice, clearly states that the secured party, reportedly Domain Capital, has the right to place a bid equal to what it is owed on the debt including principal and interest, plus its attorney’s fees and expenses.
So its not like your going to show up at the lawyers office, with your cashier’s check for $1,000,000, be the only bidder and get the domain for a cool Million.
To get the domain, a bidder is going to have to bid an amount, possibly up to what DomainCapital is owed, including fees and expenses, to get the domain (or at least an amount the creditor will accept).
We don’t know the amount originally loaned by DomainCapital, what the outstanding balance of the note is or what the terms of the note were, but among the possibilities is that DomainCapital has more cash in the transaction than the investors and/or that interest only payments were made on the note for all or part of the time, that leaving a huge balance.
Combine this with the simple fact that the domain may simply not be worth what is was in 2006.
Anyone in the adult internet market will tell you the market has changed fundamentally since 2006 and not for the better.
Adult pay site’s struggle to get and keep members with all the free porn on the net.
Yes since the inception of the net there has always been free porn, but it’s never been so organized, easy to find and overwhelming in nature.
Years ago sites would give out free samples, a few clips to tempt you to join.
A quick check out Google will return thousands of Free “Tube” sites, some of which have such a huge amount of free content they generate immense traffic.
Consider that Youporn.com, which wasn’t even registered as a domain when Sex.com sold in 2006, is now the 61st most visited site according to Alexa.
Sex.com ranks as the 67,000 most visited.
Several years ago, when an group was being put together to buy Sex.com I was approached by Andrew Miller and was invited to join.
I passed on putting up a seven figure investment for a minority interest in the domain.
I thought the price was too high; I didn’t want to be a minority owner in a venture without having control over the direction of the investment, and at the time, the direction was far from certain.
I’m sure mulitple bidders will be willing to pony up $5 Million for the domain without blinking, but that mostly likely will not be enough to carry the day.
Is this domain with fairly modest traffic worth $in excess of $10 Million when the adult internet industry is struggling to make money?
Don’t be surprised if at the end of the auction the “No Sale” sign is put up.