Marchex: What To Do With 200,000 Domain Names?

| About: Marchex, Inc. (MCHX)

Marchex (NASDAQ:MCHX) is a company with great assets that keeps coming up short on performance. Shares recently fell to a 3 year low after reporting results which missed expectations and issuing a disappointing outlook for the next quarter.

Marchex owns a portfolio of over 200,000 domain names. This includes a large number of zip code domain names like and domains with semantic or type in value like or They were one of the earliest public companies to invest in domain names for the purpose of monetizing direct navigation traffic. In late 2004, they purchased a portfolio of over 100,000 domain names from Name Development Ltd. for $164.2 million.

Initially, most of their domain names were populated with generic pay per click advertising landing pages. They have recently moved towards turning their locally targeted domain names into basic websites with local content. Is this the right move?

There are three basic options for monetizing domain names:

1.) sell them like assets;
2.) monetize direct navigation traffic with generic pay per click landers; or
3.) build websites with some kind of revenue model.

Marchex's most recent move seems like a half-hearted attempt at the third option. Their developed websites basically still seem generic since they all follow the same cookie-cutter format, and the content just seems like information with some extra tweaks. At the end of the day, the websites don't bring anything unique to the table.

By trying to come up with a monetization strategy for a huge batch of their domains at once, I think Marchex is overlooking a greater opportunity. In focusing on locally targeted domain names, they have basically devoted their efforts to creating websites for the long tail of their domain channel. [How many people type in] What they should be doing is focusing on their best domain names and trying to create individualized websites with unique value propositions and the potential for becoming popular destinations.

In other words, instead of creating 100,000 bad websites, create 100 good websites.

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