Cars.com has been confirmed to have been the largest domain sale in history, with a staggering $872,320,000 dollar valuation.
Domain investor, George Kirikos, provided this number two years ago, and is once again quoting the numbers from the latest Cars.com financial statement:
In connection with our acquisition by Parent, we have an intangible asset with an indefinite life associated with the Cars.com trade name. This asset represented 34% of our total assets at December 31, 2016. The indefinite lived intangible asset is tested annually, or more often if circumstances dictate, for impairment and is written down to fair value as required. The estimate of fair value is determined using the “relief from royalty” methodology, which is a variation of the income approach.
The discount rate assumption is based on an assessment of the risk inherent in the projected future cash flows generated by the trade name intangible asset. The results of our 2016 annual impairment test of the indefinite lived intangible asset indicated the fair value exceeded its carrying value by more than 10%, and therefore, no impairment existed.
Although the trade name asset is not currently impaired, changes in future market rates or decreases in future cash flows and growth rates could result in an impairment charge in a future period.
Hopefully this puts closure to arguments on the value of the domain itself; the entire company was sold for $2.5 billion dollars.
Copyright © 2024 DomainGang.com · All Rights Reserved.
WOW!
Think about this for a second: This is saying that 1/3 of this online enterprise’s ASSET-valuation (not overall equity) is directly attributable to its category-killer domain name.
A lot of us have probably assumed over the years that, for mature, online companies, a great domain name would likely account for between 5% – 10% of their brand value — but this sets an new, high-water benchmark.
This example should be prominently displayed on the homepage of GD, Sedo, Uni, and every other major player in our space.
Relief from royalty methodology : This method looks at the costs you save by owning the right instead of leasing it. If you own the applicable right, you can achieve the value by calculating what the rent would typically have been in terms of licensing fees (also called royalties) for licensing the same right from another business.
Some additional reading on intangible asset valuation http://www.oecd.org/tax/transfer-pricing/47426115.pdf
Contains a formula for the “Relief from Royalty” method of valuation.
It’s important that this is not a ‘mark to market’ valuation, which would be far, far less. ‘Mark to market’ would still be in the double-digital millions, yes, but not as high as the company values it using GAAP (Generally Accepted Accounting Principles) within the confines of its operating business. Certainly, the company could never sell the domain name alone on the open market for $872.3 million dollars. Prospective buyers would laugh at them. The domain name alone is simply not worth that much without the operating business in which it is an intangible asset. This is just one company’s opinion within GAAP as to what the domain name is worth to THEM.
Logan – It’s not an “opinion” if it’s reported as an asset with a valuation price, calculated by an acceptable method and formula. Whether that same domain would sell “as is” for e.g. $10 million, is irrelevant; the fact is that it did sell, and the domain portion of the $2.5 billion acquisition is valued at $872 million.
This is excellent news for all Domain/Website Name enthusiasts and investors and it is yet one more example that none of us truly know the value that a GREAT Domain/Website Name can bring to an organization. Another brief article & video below (which most of you have probably seen a dozen times) also tries to prove this point.
http://www.domainsuccess.com/spending-35m-on-a-domain-name/
We’re not there yet, but I envision a day where a Domain/Website Name is its’ own asset class and very easy to valuate . . . just like what we all continue to compare it to today; REAL ESTATE. Until then, it’s in all of our best interests to work together and find a simple set of formulas that make this easy for everyone to understands AND credible.
Page F-9 near end shows summary grid of assets…
https://www.screencast.com/t/09ICLJZe
Page F-2 of the SEC filing indicated that Ernst & Young has audited this and found it to be accurate…
https://www.screencast.com/t/c4XF0gvhNN
George found the SEC data.
I am just highlighting extra data that renders this highly credible.
The Cars.com IPO is worth tracking, as this provides real “mainstream business media” credibility to the true value of the handful of domain names that are among the most valuable domain names in the world…
https://www.cars.com/articles/tegna-board-of-directors-approves-spin-off-of-carscom-1420695339364/
Gordon – Many thanks for digging up and sharing the additional information!