DJ GOING PUBLIC:

NameMedia's Website Users Help Build Business

By Brian Coyle Of DOW JONES NEWSWIRES

January 25, 2008

Like investors in real estate, investors in Internet properties are concerned above all with location, location, location. NameMedia Inc. is no exception, but it has the additional advantage of having volunteers help improve its properties.

NameMedia, which plans to offer shares in an initial public offering, is following the model that built Wikipedia, YouTube, MySpace and Facebook into formidable Web presences, and that means relying on users to supply content. While its scale is relatively small, NameMedia has been profitable.

The Waltham, Mass., company deals in two kinds of Web real estate: top-tier domain names that it tries to exploit, such as Photography.com and Gardens.com, and other domain names that it sells.

Kelly Conlin, a spokesman for NameMedia, said the company develops its domains by creating online communities. "Unlike the model of early-generation Websites, which relied on editors to publish content, NameMedia's strategy for developing its enthusiast sites utilizes social-networking functionality, where the expertise and experiences of the community generate the majority of content through discussion forums, blogs, media sharing and other self-expression tools," Conlin said.

In its regulatory filings, NameMedia says it plans to use the money it raises in its IPO to make acquisitions, invest in product development and expand into international markets.

The company, which has filed to sell up to an estimated $172.5 million in stock, has spent around $62.5 million on eight acquisitions over the past two years, including the purchase of a domain name portfolio in 2006. It said about half of the 40 domain names it purchased will be developed as enthusiast Websites, although it didn't disclose the names.

The company, which has a portfolio of more than 2.25 million Web names, also operates an online media business that allows advertisers to reach highly targeted audiences through a network of proprietary and third-party Websites.

Advertising on its enthusiast sites is also aimed at specific audiences. "Most of the advertising on these enthusiast sites is sold directly to endemic advertisers in the category," Conlin said. For example, Gardens.com has ads from seed company Burpee, and camera company Nikon Corp. (NINOY) is an advertiser on Photography.com. dvertisers are attracted to these sites because of Their performance-based models, in which fees are charged when a consumer takes a specific action, such as clicking on a link.

Besides its targeted media operations, NameMedia buys and sells domain names. Customers can choose names from lists on BuyDomains.com and Afternic.com, or on sites using the company's listing service, which include seven of the top 10 domain registrars. Its proprietary trading platform, SiteMarket, can also be used to identify and value high-quality domain names that are relevant to smaller businesses looking to develop online identities.

NameMedia competes with domain-name portfolio owners whose primary business is online advertising, such as Demand Media, Marchex (MCHX) and Oversee.net, and large Internet companies that provide performance-based advertising services, such as Google Inc. (GOOG), Microsoft Corp. (MSFT) and Yahoo Inc. (YHOO).

Conlin said a primary difference between NameMedia and Internet companies of the late 1990s is that it's profitable. "The basic rules of media - attracting an audience and providing that audience with content and advertising - haven't changed. Companies that did that successfully on the Web in the '90s are still doing well, while those that do that today can also be successful," he said.

For the nine-month period ended Sept. 30, NameMedia reported net

income of $160,000, off from $2.2 million in the 2006 comparable period. At the same time, the company saw its revenue climb 38% to $58.3 million from $42.1 million.

Francis Gaskins, editor of IPODesktop.com, said NameMedia is a company that primarily relies on acquisitions to fuel its growth. He also said that investors will probably be lukewarm to NameMedia's IPO because the company has a mature business and fluctuating top-line growth.

NameMedia hasn't disclosed how many shares it plans to sell, and it hasn't provided an estimated price range for the IPO. The company, which filed for its initial public offering in early November, plans to list its shares on Nasdaq under the symbol NAME.

By Brian Coyle, Dow Jones Newswires