Business.com sold for $345M, ending seesaw story

Business.com, the site that provides a search engine for businesses to find products and services, has been sold to R.H. Donnelley, the yellow pages and local search firm, for the $345 million.

There was initial interest IAC, New York Times, DJ and News Corp, according to PaidContent.

Business.com of Santa Monica, Calif., does have earnings of $15 million (EBITA) and thus has a real business around it. It gets paid from sending search traffic to businesses. There’s no question much of its business direction has been influenced by its name. You can argue whether or not the huge price is worth it or not, but the main lesson here is how much fortunes can change within a few years.

As PaidContent notes, this company became a laughing stock of the industry shortly after Jake Winebaum and Sky Dayton paid $7.5 million on the Internet domain name in 1999, making it one of the highest priced names ever. It raised $80 million from investors to develop a business portal, but it got nowhere and essentially went bust after the dotcom bubble burst. We know someone who left a safe job to join the company during its heyday, with high aspirations, but who was then forced to leave.

In 2004, new investor Benchmark injected a $10 million into the company, after resetting the value of the company, and steered it to focus more on directory and industry search — and a business-to-business pay-per-click ad service. Benchmark was the largest shareholder, followed by IVP, which invested $6.5 million the following year.

Benchmark’s Bill Gurley told Dow Jones the domain name had “nothing to do with the core execution of the company.”

But he did note that sentiment arbitrage is important for making good investments. “You want to be optimistic when people are fearful,” Gurley told Dow Jones. “The opportunity presented itself to us at a time when people said the founders wasted money on the domain name.”

The company recapitalized in 2004 with a $10 million investment from Benchmark, and IVP invested $6.5 million the following year. The firms were the only remaining institutional investors at the time of the acquisition.

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