B10WH

Some say that there are big money in domain after market. I would admit that I used to underestimate this niche and even when I was executive of a web hosting company, we never used expired customer’s domain to park them and to squeeze some money from them. But probably I wasn’t good enough for the job. Because Giuseppe Grillea from NameDrive. I met him on WebhostingDay 2009 in Cologne and he told me that many people used to earn money from their parked domains. It is the same with the company he works for. It makes a lot of money from the domain after market.

If you have to explain what NameDrive is with one sentence what would you tell you prospective customers?

Domain monetization, we create mini-web sites for empty domains and pack them with pay per click advertisements and domain brokerage services where we buy and sell domains for our customers or we put them at auction. Wow that was a long sentence.

Who the other companies, a competitors of yours on the domain parking and after market?

Sedo, Domain Sponsor, Parked, Hitfarm and many others.

Tell me more about NDX Market?

NDX Market is our platform where customers can buy and sell domains. You can buy the domains at a BuyNow price or in an auction. It is very simple to use and it is a free service. Using NDX Market you can also ask our brokers to help with the transaction for premium domains, in exchange of a moderate fee which covers also escrow fees and all the paperwork.

You said there is no contracts. So how do you then guarantee the client’s account In terms of payments and protection of their property?

When you sign up/open an account su NDX Market you agree to our Terms of Service which guarantee the protection of payments and property.  See the link: http://www.namedrive.com/txt_terms/Namedrive_Terms_and_Conditions_en.html

By the way in parking there is no exchange of property. The domains are in our clients’control at all times. They only point the DNS to our servers.

There is something like consulting service on NameDrive’s website called MisterBlog. Would you explain what is this?

Mister Blog keeps our clients and people in the industry updated on our industry. Mister Blogs is well loved and offers advice for free.

In general you can always talk to any of our brokers who will be happy to give you all the advice you need to manage your domains at best.

How much anyone would make from parking their domain with NameDrive on average. I mean if the domain is not that popular. Let’s say I have 10 domain that receive 3,000 visitor per month. What click ratio I would expect to have?

It all depends from the amount of traffic, conversion rate and types of products advertised on your page. Finance, credit card related will get more than say food, news, politics etc…  Also the conversion rate can vary a lot. Tourism portals always have a much higher conversion rate than a finance or electronics domain. The main point is that if you have underutilized domains you should park them and test them with different companies to see where your domain performs best.

There is only one way to find out. Park with us and you will find out :-)

You said in our conversation before the interview that your clients can sell even your domain names… ?

Our corporate partners, hosting and registrar can sell our 5,000,000 domains on their platforms if they choose to integrate with our system in exchange for a big portion of the sales commission. Individuals non corporate clients cannot sell our domains… but they can buy them :D

How long does it take for a customer of yours to get their money? Let’s say someone made $120 for the month of March. When they can expect to get their earning?

You will receive your $120 on the 15th of the following month: on the 15th of  April in your example.

It was good to talk to you. Tell me now do you use NameDrive for your own domains  :)  and send your message to domain name owners.

Of course I would not trust anybody else with my domain investments but our company! Thank you for your time and interview and I hope to see you soon.

We all know what investment banking is, or at least most of us have learned something about investment banking… thanks to financial crisis. Well today “Investment banker” is probably not the most appreciated job in the world. Sadly most people are tending to think that investment bankers are guilty for the current global economic slowdown. Well I’m not one of them. So when I met Frank from Cheval Capital I was interested of his business. I asked them whether he would talk to B10WH and Daw Blog readers and he said “Yes!”.

Hi Frank, good to talk to you. There is a lot of things anyone would like to ask an investment banker (or at least I think so), during the current crisis. Let me start with this one. Is the financial crisis affecting the web hosting industry? My impression is that web hosting industry looks pretty much as isolated island, that does not need bailouts… It that true?

Hi Dimitar.  Its great to talk with you as well. I think your impression is largely right (at least so far.)  We’ve talked to a lot of hosters and our sense is that while most are doing fine, growth has slowed.  A line from the recent Microsoft conference that rang true was “steady is the new growth.”

After two years of web hosting mergers and acquisitions are the investors still interested of buying hosting companies? Which is the most interesting market niche – data centers and collocation providers, dedicated and managed hosts, VPS providers or Shared hosts?

While we have seen fewer buyers, there are still a number out there.  Keep in mind that the most common type of buyer is another hosting company that is choosing to add customers by purchase versus marketing.  As this type of buyer tends to buy out of cash flow, financing isn’t a problem.

Right now, we’re being most aggressive in buying shared hosting customers at good prices.  Overall, there seems to be demand in all the sectors we work in.

Do you think that once the crisis is over, there will be a growing investor interest in buying cloud computing and cloud hosting technology producers and providers?

I’m not great at predictions.  To me, it comes down to value.  If cloud operators can add customers at cost effective rates and thus create value, then investors will always be there.  Unfortunately, the tech sector is littered with great technologies that no one would buy.  All in all though, cloud computing looks pretty good.

I have seen that Cheval Capital have completed 29 transactions in 2008. Do you think you’ll make more in 2009?

I hope the trend continues but you never know ;-).  We’ve been very fortunate since we got started in the space in the late 1990’s and have completed over 140 hosting and ISP transactions.

How big web hosting company in annual revenue should have someone to be an interesting client for Cheval Capital?

We work with companies of all sizes.  A few years ago we started a small hoster program that is working quite well.  We’ve also been involved with some of the industry’s largest transactions.  So really, all sizes.

Would you tell me which are the most important things anyone should be prepare when selling a web host hosting company?

That is really hard to answer generically.  The key is to have the information that enables you to demonstrate the value of your business and that it has reasonable risk profile.  Typically the larger the business, the great the expectation by Buyers of financial and operating metrics.

As you know, there are two broad types of buyers, “Consolidators” that want to buy customers and move them onto their own infrastructure and “Strategic Buyers” that want to purchase the whole company and operate it largely as is.  Both will want to confirm:

(1) the amount of revenue that your customers generate and the stability of that revenue

(2) your ability to add new customers at reasonable cost and the ability of the buyer to continue doing so.

The Strategic Buyer will also care about the efficiency of your business and its assets and liabilities.

The top three things all hosters must have are:

• An general overview of you, your company, its operations, etc.  (We have a form that we ask sellers to fill out that covers all of these topics.)
• Income statements for the last several months and for the previous year with revenues broken down by the type of business; and
• Backup to confirm those revenues (e.g. paypal, merchant acct stmts, etc.);

What about buyers… what do they want to see when they are looking to invest in web hosting business?

It really varies by buyer and the type of transaction.  Some buyers are creative and flexible and will look at anything that gives them a feel for the two items above.  Others are less so and require the other extreme of audited financial statements, tax returns, etc.  Typically, most Consolidators require less information.  I can’t stress enough that the key is to provide the buyer with confidence in the existence and stability of your customer base.

Something about Cheval Capital. Why did you decide to form an investment bank that specializes in web hosting industry? I’m curious how an investment banker decided to come to web hosting market.

Luck.  Our specialty has been working with venture capital backed companies that are consolidating industries or markets.  In the late 1990’s we got hired by Verio and the Centennial Funds to do ISP acquisitions and it just went from there.

What is your projections about the hosting industry’s developments? Do you expect growth in 2009, or web hosting will be affected from the global crisis?

I think the industry is fortunate in that it is a recurring revenue business with strong margins and, for most, little to no debt.  It also provides a service that is absolutely core to business.  Those characteristics should protect the industry from major trauma.  However, in bad times new company formation will slow and customers will go out of business.  Whether this causes the overall industry to shrink or just grow more slowly I don’t know.

Finally, is there are any company/brand in web hosting that you’ll love to consult, sale or buy?

We’ve been very lucky to work with a lot of great companies in the web hosting business, both large and small.  My hope is that it will continue.