" Housing prices may be fizzling in the real world, but online, a virtual land grab is under way, with financial heavy-hitters snapping up what they see as the Web's beachfront properties: generic Internet addresses like Carbs.com.
Starbucks Corp. Chairman Howard Schultz, billionaire Ross Perot and Richard Rosenblatt, formerly chief executive of MySpace and its parent, Intermix Media, are just three of those attempting to build sprawling businesses around these Internet domains.
And the list is growing. ``As of late 2004, it wasn't obvious to us that you could turn domains into a real business, but that's definitely proving to be the case,'' said Jeff Horing, a venture capitalist with Insight Venture Partners in New York, which has one investment in this area.
Why are these properties so hot? It owes to a rapidly growing phenomenon known as direct navigation, in which people skip search engines and instead try to find things directly online. The investors are trying to transform generic domains like Golflink.com into easy-to-find sites that will draw enthusiasts and, consequently, advertisers.
Little wonder given the opportunity. According to the investment bank RBC Capital Markets, direct navigation was expected to generate $650 million in sales in the United States last year and it estimates the business could hit $800 million this year. The money is largely coming from the display advertising at the sites, which is shared with search giants like Yahoo and Google.
Publicly traded Marchex, a search optimization company, first captured the attention of industry observers when it paid $164 million for the Name Development company -- owner of roughly 100,000 Internet addresses, including Debts.com -- in late 2004. Since then, a wide number of other, well-funded competitors have sought to roll up domain businesses.
Houston-based Internet REIT, for example, owns a portfolio of more than 400,000 domain names and a growing number of overseas addresses. The privately held company has raised more than $20 million from investors including Perot Investments and Maveron, the Seattle-based venture capital firm founded by Schultz.
Richard Rosenblatt, who sold MySpace parent Intermix to News Corp. in 2005 for $580 million, is also amassing hundreds of thousands of Internet addresses, fueled by $220 million that his 10-month-old startup, Demand Media in Santa Monica, has raised from several venture capital firms over two financing rounds..."
The full story : http://www.siliconvalley.com/mld/siliconvalley/business/financial_markets/venture_capital/16546681.htm?source=rss&channel=siliconvalley_venture_capital
