sex.com - your final exam in valuation.

[DomainAppraiser]

B+

Nice Job!

Originally posted by mudfence
Unless your still living in the 1998-2000 years.

Internet business's are usually valuated using the "Market Data Approach".

Formula: annual earnings/capitalization rate = market value

Note: Capitalization rate is a multiplier or divider used to convert an income stream to an indicated value.

For example, if several comparable businesses sold for prices which ranged from 3.2 - 5 times earnings, the capitalization rate would be 1 divided by 3.2 equals .313 and 1 divided by 5 equals .20.

The upper limit of the range would be 31.3% and the lower would be 20%.

Deciding between 31% and 20% is based on the risk involved in the investment.

The risk involved is determined by looking at the type of business and the economic market at the time of the purchase.


If an investor wants a return of 25% on his investment, then he would be willing to invest $40,000 in a business that has expected earnings of $10,000.


In this case:
Low ball:$36M per year = 115,20000
High ball:$36M per year = 180,00000

Low ball:$100M per year = 320,00000
High ball:$100M per year = 500,00000


From looking at the site. Its obvious that the income generated is from affilates or other outside sources etc.

This leads me to believe that the actual domain is worth more than the current site.

Also, if this site is turning $36-$100M a year you would think this person would have enough money to hire a professional web developer.

Thats my story and I'm stickin with it

Cheers!

 

[.com.net.org]

I wonder how's A grade analysis will be.

 

[bidawinner]

Your question is the Valuation of the DOMAIN -SEX.COM- not any past , current websites at SEX.COM

With that in mind.
I would startmy valuation by checking to see if there is even a MARKET for SEX at overture..

http://inventory.overture.com/d/searchinventory/suggestion/

I quickly determine that indeed there is a very large matket of some 2.8 million searchs fro "SEX" every month on oveture alone.

Next I check for a rough estimate of TYPE-IN traffic..the old pros' realize that the road to PROFITABLITY is easier if it is paved with TRAFFIC that dosent need a expensive Search engine marketing campaign.

I check http://inventory.overture.com/d/searchinventory/suggestion/

again this time for "SEX.COM" and I see 212,000 searchs for sex.com ! very impressive ..considering these are the MORONS or uneducated that are using a SEARCH engine instead of their URL address bar foir "SEX.COM" ..

I multiply that number by 4 to represent the roughly an equal amount of searchs acroos all the major SE's..= 848,000 ..I divide that number by 2 to subtract double searchs across the board..(this is a rough number gained by through experiance)

= 424,000 searchs for SEX.COM done in all the se's every month..now keep in mind thats the people who dont understand simply type SEX.COM in your URL browser bar.. I multiply that by 2 to get all the people thet DO understand how to type an address in a URL..(in other words at LEAST twice as many will type SEX.com in their address bar as though that type SEX.com in a search engine) so 424,000 x 2 = 848,000 + 424,000 (the SE people)= 1.27 million "type-ins"
every month world wide.

So that Traffic of 1.27 Milllion is your VALUE..

To Place a dollar amount on the VALUE is a bit more tricky.

Now I am not a porn site builder ..

so I'll have to "wing" it and estimate that you can convert 1 sale for every 100 visitors..at $10 a month= $127,000 month revs from a simple retail access to porn,

Ad rates of 10,000 a month ..10 of those = 100,000

Sale traffic, 20-40 K a month.

and Sex "toy" products maybe another 20K or so..

So that covers the 4 major forms revenue.. so for a very basic setup it should with little trouble bring in 1/4 million every month in revs..

250 X 12 months = 3 Million a year for a BASIC set anyone could set up..

.. I could see a multiple of 2 = 6 million as a HIGH



This is a VALUATION for the domain sex.com based on type-in traffic with a value of $10 per every 100 visitors on current avg visitor/sales ratio (porn industry webmasters can see tell us if I amclose on that number)

I also will point out that Forbes claims the ENTIRE internet sex business is only 1 Billion..

http://www.forbes.com/2001/05/25/0524porn.html

Now keep in mind this valuation is for a 1 year value... multiply that by how many years you think the internet will resemble as it is today AND interest of course.
And of course add a premiunm simply because it is "SEX.COM"
A "vanity" premiunm

 

[Whois-Search]

$0

not worth the hassle
the court fees
and the bandwidth bill

 

[options]

As far as I could find, the company is not listed on any exchange.
Even if it was, there are no financial statements and other necessary data which could be used in analyzing the business.
The only data available is their average daily income which comes
at $17,000 before operating expenses, so I would assume $12K-14K average profit or $five million a year (before taxes).
I would also assume their assets are almost non-existent (as cash, inventory, property, contracts, goodwill, etc) as well as liabilities.

What remains is their revenue that proves to be consistent in past years.
Sex.com seems to be underdeveloped, with much place for improvement, so I would say it can be valued at four years its net revenue or $20 million. The uncertainity of internet businesses was
also taken into consideration.

 

[Shiftlock]

sex.com is worth about $450 Trillion dollars.

Guys, this is a DOMAIN NAME we're talking about. Yeah, it receives a lot of type-in traffic and is obviously very brandable, but the main ingredient to a successful website is still CONTENT. These valuations in the $100 million range are ridiculous. No domain name is worth that much, because nobody will pay that much for a domain name. If you set up a website on funsexwebsite4u.com and spent the $100 million on promotion you will do far better than blowing $100 million on the domain name.

 

[GeorgeK]

One would need to know more about their financials to get a good analysis. For $5, I won't dig that much. On a relative basis, though, consider that UDate.com did the following deal:

http://biz.yahoo.com/rc/021219/media_udate_2.html

$150 million in that deal.

Yahoo's market cap stands at $10 billion, see:

http://finance.yahoo.com/q?s=yhoo&d=t

Expedia is at $4 billion:

http://finance.yahoo.com/q?s=EXPE&d=t

Overture is at $1.7 billion:

http://finance.yahoo.com/q?s=over&d=t

Playboy is at $260 million:

http://finance.yahoo.com/q?s=pla&d=t

but with Playboy stock, you inherit the debts of the firm too. Looking at Playboy's revenues,

http://biz.yahoo.com/fin/l/p/pla.html

They're about $70 million per quarter, or say $250 million per year. Can sex.com generate comparable *revenues* (forgetting about costs) than this real-world company, with extensive media holdings (including 50 years of content)? I don't think so. So, this at least provides an upper-bound on what sex.com could ever do in revenues, methinks.

Given the above, I'd give them an "eye-ball" value of $300 million to $600 million. But, with more info as to their operations, one could do a much better analysis.

 

[NameCaster]

"If you set up a website on funsexwebsite4u.com and spent the $100 million on promotion you will do far better than blowing $100 million on the domain name."

There's a big difference between Having to promote a domain and having a domain that literally promotes itself.

Even if the current rev for sex.com is $5M a year. Its still worth between $15-$25M.

Using standard business logic to evaluate domain names is normally a no-no.

There are some acceptions...and this is one of them.

Domain names don't get any better than this!!!

I say this because the adult industry is a major part of Internet revenue stream. Regardless of what Forbes mag says.

Cheers!

 

[options]

George, just a small comment.
Udate makes $40 million revenue a year, sex.com $5 million.
Udate is acquired for $150 million in stock.
Don't you think $600 million for sex.com would be way too much?

 

[DomainAppraiser]

I will definitely continue grading this evening!!

Thanks,
Jeremy

Originally posted by options
George, just a small comment.
Udate makes $40 million revenue a year, sex.com $5 million.
Udate is acquired for $150 million in stock.
Don't you think $600 million for sex.com would be way too much?

 

[options]

Originally posted by options
George, just a small comment.
Udate makes $40 million revenue a year, sex.com $5 million.

Correction - Udate's profits are $12-13 million a year, but
the question remains.

 

[GeorgeK]

Make the prize $500 instead of $5, and one would get a much better analysis that would examine NPV, multipliers/risk of comparable cash flows, etc. For $5, time is better spent elsewhere.....

I don't think $600 million is out of the realm of possibility if they did an IPO at this time even. With interest rates so low, and their excellent cash flow and growth prospects, (remember, the multiplier depends on growth too, not just interest rates), just the annuity value of doing nothing but pointing it at PPC search engines forever would be quite a lot (i.e. 30 or 40 multiplier, or more).

If they were to invest in their business smartly, they could probably leverage that URL more effectively than other players. That greater investment return, compared to their competitors, is also worth something.

Suppose they do nothing, and have something like 300,000 to 500,000 eyeballs everyday -- how much is a tv program worth in syndication with that many eye-balls, EVERY DAY, and discounted from now until kingdom come (cum?)? Quite a lot....

 

[GeorgeK]

$5 million/yr for sex.com seems way too low. There are adult players out there with portfolios of thousands of names that already do that.

The margins for sex.com must be huge, too....so revenues are all that matters, for the most part (i.e. look at their gross, instead of their net, as they've not really had to spend $$$ on content, or 500 employees with Aeron chairs).

If I was sex.com, I'd also look into moving offshore, as the tax bite being in the US will hurt their ultimate valuation.

 

[options]

Originally posted by GeorgeK

... if they did an IPO at this time...

That was exactly on my mind too. But I don't think
they could get more then 15-20 million with that move.
Sex.com.au e.g. have market capitalization of about $8 million.

 

[GeorgeK]

They'd have to sell only a small amount, say 10% of the company, to test the valuation. They can probably get a 30 to 40 multiplier, or higher -- if their revenues are $20 million+ per year, that would push valuation into the range I mentioned.

If they get 15 to 20 cents per unique on 250,000 daily visitors (which is the bid on words like "porn" at Overture), that is:

250,000 * 0.20 * 365 = $18.25 million/yr

So, the cash flow potential, just from doing nada, is huge. I could see valuations above $1 billion or more, if they more effectively monetized their traffic, and also did partner programs, etc. Porn is a huge industry, and isn't going away anytime soon, even with cloning.

 

[options]

No, they have only $17,000 a day, found at the court.
Besides those "only a name" businesses proved to be on the edge of smoke and mirrors.
My example of sex.com.au is from their best days, old news found here:
http://afr.com/marketwrap/ipos/sexcomau.html

But, look at this, a bit later:
http://old.smh.com.au/news/0105/23/biztech/biztech5.html
http://afr.com/specialreports/report2/2001/07/11/FFX3X18PVOC.html

which proves uncertainity of such ventures and that has a huge influence on price.

 

[GeorgeK]

If $17,000/day is their actual revenues (not sure how out of date that is?), that would obviously be another piece of data to change the valuation. Seems a bit too low, though -- could be "Hollywood" style accounting, where no movie ever makes a profit?

If I wanted to minimize taxes, I'd be fiddling with the revenue numbers, too, trying to defer them into the future, etc.

 

[options]

That was actually from the ruling in the case. I can't find the page
anymore (as always) but it comes in line with the damages.
Out of $65million, $40million were compensatory damages for
using the name in seven years period.

Value?

This is from March, 2001:

"How much was the domain worth? Nobody knows. Cohen was supposedly offered US$48 million for the site; claims of an offer of US$85 million were dismissed by the UK Financial Times as a stunt."

 

[timechange.com]

The domain sex.com is worthless in the sovereign state of Vatican

 

[CoolHost.com]

Please remove this domain from the "Appraisals" section! The domain does not belong to you, and those are the (new) rules! Thanks.
Good Luck.