Private equity firm makes a big bet on the domain industry

January 15, 2008: 3:45 PM ET

By Paul Sloan

Score one for the ever-growing domain name industry.

Oversee.net, a Los Angeles-based company that's largely in the business of managing and making money off domain names, on Tuesday snagged a $150 million investment from Oak Hill Capital Partners, a Silicon Valley private equity firm. The two firms didn't disclose terms of the transaction, but the investment is a big boost for Oversee as it expands its offering around all things domain.

The domain industry has quietly gained legitimacy in recent years as VCs and Wall Street have gotten into the act, and this investment can only help. Oversee.net is well known to so-called domainers -- people who buy and sell domains and generate revenue with pay-per-click advertising. Many domainers "park" their names with Oversee's Domain Sponsor business, which populates sites with ads through a direct relationship with Google (GOOG).

But Oversee has been branching out: Last year, it paid a reported $35 million to buy SnapNames, which is the leading after-market auction house for domain names. Then, earlier this month, it bought a Florida company called Moniker for a reported $65 million. Moniker, where many big domainers register their names, has run a number of live auctions for domain names.

Meantime, NameMedia, which in 2005 bought a portfolio of 500,000 names for about $80 million with backing from Highland Capital, is on track to go public. It filed with the U.S. Securities and Exchange Commission last November, hoping to raise $172.5 million. Whether that actually happens will of course depend on the ever-shaky markets.

The irony here is that while many stocks are taking a beating, prices for domain names continue to soar. There's no Dow Jones-like Index for domain names, so it's hard to track precisely. But it's common for generic domain names to go for five, six or even seven figures -- and not all have to do with sex (although porn.com did sell last year for $9.5 million).

Even simple sounding names can fetch big bucks. The first week of 2008, for example, saw the sale of Spicy.com. The price: $81,000.
Dot-com names continue to command higher prices than extensions like .net or .mobi. Given Oversee.net's growing clout, you'd think the company would manage to snag Oversee.com, which is now privately registered at GoDaddy.

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