No ShrinkWrap Web2.0 Reviews

Today is a busy day in the Web 2.0 space with lots of money flowing and rumors substantiated-

• Everyone is reporting the CBS purchase of Last.fm for $280 million (which follows the recent purchase of Wallstrip for $5 million). As an aside, this could be an interesting purchase, particularly with the recent spat between Viacom (also owned by CBS parent National Amusements) and Google’s YouTube – is that a precursor to where CBS intends to leverage Last.fm? Could we soon see a property emerge that streams CBS and Viacom shows, makes recommendations based on your profile and makes the shows available for purchase?
• TechCrunch and GigaOM both claim eBay will confirm the rumored Stumbleupon purchase later today. Despite the blogosphere’s confusion on how Stumbleupon fits eBay’s business, I think it’s a smart move and complements eBay perfectly. Here’s a snippet of what I said last time the rumor broke:
  
  StumbleUpon’s new feature StumbleThru could very well be the feature that pushes eBay to new community-centered heights. Improved searches, randomly discovering auctions based on user preferences, a comment and product rating system, tagging – eBay appears to be purchasing in one fell swoop an entire community of people already enjoying and familiar with the process of rating and commenting on sites who would likely gladly do the same for eBay auctions… eBay could even further expose auctions by offering a “stumble this on eBay” option in browsers and an official eBay widget or “blog this” feature. Amazon has shown us that adding community features is a great way to increase visibility and user-retention; with StumbleUpon, eBay could leapfrog into the community game and improve its existing technology at the same time. It’s a win-win.
  Read the original entry for more.
• TechCrunch is also reporting the Fox Interactive purchase of both Photobucket and Flektor. I have to admit – this one stumps me a bit. Perhaps the next American Idol will be American Director, featuring a slew of user-contributed video submitted through MySpace. Or perhaps MySpace will move into the video and advertising markets, as it started in the indy music space. They must have some interesting plans up their sleeves.

With all these reports of money flowing through Web 2.0, I barely noticed an article that talks about where the real money is: domaining.

Meet Kevin Ham. Ham owns a portfolio of over 300,000 domain names that, together with other assets, purportedly generates over $70 million a year in revenue. His domains generate money by serving targeted ads to visitors using a practice called “direct navigation” or “direct search” – those of us who, instead of searching Google for wedding shoes, type “weddingshoes” into the browser address bar. The browser automatically attaches .com by default, landing you at weddingshoes.com – which, of course, Ham owns. Ham serves advertisements that look like real links, people click on the ads, and Ham makes money. Multiply that by 300,000 and you’ve got an impressive business model.

With that in mind, I read an interesting article at The Alarm Clock this morning about NameMedia, a company that both maintains a portfolio of domains (which are available for purchase through an in-house marketplace) and provides targeted advertising for domainers. The New York Times reports that

Youssef Squali, an analyst with the investment firm Jefferies & Company, said NameMedia faces stiff competition, “but I see these guys as the front-runner.” Among other things, Mr. Squali said the profit margin at NameMedia was 40 percent — a number that other industry executives said fairly represents the category over all.

“They’re paying nothing to acquire a customer,” he said. “I think the next wave of I.P.O.’s will be around this area.”

The direct navigation market attracted more than $800 million in ads last year, which publishers largely shared with Google and Yahoo. That figure could reach $1.1 billion in 2007, said Jordan Rohan, an analyst with RBC Capital Markets.

40% of $1.1 billion in profit – that’s a lot of money. And Frank Schilling (a big-time domainer himself) says that’s a conservative number – NameMedia could be making as much as 70-80% profit. And it stands to get even better – by leveraging RSS feed aggregation, vidcast content and other consumable information, domainers could turn their cesspools of advertising into information portals, bringing repeat traffic. Repeat traffic! Can you imagine someone choosing to visit an advertising site?

With information becoming more consumable through automatic feeds, advertising being served through more interesting channels, and an impressive profit margin, it’s no wonder NameMedia is being identified as the next big IPO. Throw in some relevant and authoritative-sounding articles served through RSS, scraped user reviews and ratings and a bunch of ads, and you’ve got a money-generating portal people benefit from visiting – Billboards 2.0.

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