Search: The real value of Business.com

[geek]

The $300m price-tag for Business.com is presented, in the Wall Street Journal, as evidence of the extraordinary inflation in domain prices. Business.com was, when bought in 1999 for $7.5m by Jake Winebaum and Sky Dayton, the most expensive dot-com name to be traded; the company built on that instant brand is now worth 40 times as much. But the valuation of Business.com, which is being pitched by Credit Suisse, says more, in fact, about the extraordinary economics of search engines.
business.com
The Business.com site is little more than a rebadged version of Google Adwords, serving the search engine's text ads in both the main column of search results, and the sidebar, alongside a few perfunctory business listings. Business.com pages are so useless that the site is its pages don't appear in the Google index, but the search engine's text ads still fund the company. The company's pitchmen claim earnings will hit $15m this year, making the $300m pricetag quite reasonable, at least by the degraded standards of this internet boom.
So, what's the moral of the story? It certainly helps to have a domain that web newbies are likely to type into a browser address bar. And those are the internet users most likely to click on text ads. But here's the bigger lesson: search is such a lucrative business that fortunes can be made by even the most cynical of operators, with the thinnest of products, and the tiniest slice of the market.
And that explains why a search engine like Barry Diller's Ask can spend $100m on a widely-mocked advertising campaign, and probably still consider that a good investment. Or, also, why Jason Calacanis' Mahalo, seemingly foolhardy in taking on incumbents like Wikipedia and Google, should not be written off. I had rather have money in one of the losers, in search, than one of the winners in most other internet fields.
[IMG]http://feeds.gawker.com/~a/valleywag/full?i=wnMlHN[/IMG]


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