Debunking the Business.com Myth: It wasn’t 7.5 Million

Tuesday, Oct. 10 2006 | Author: Dave

With all the web 2.0 hypemania these days (eg MySpace’s ‘100,000,000 users’ or YouTube’s 1.6 billion dollar valuation) it is also important that we take a moment to pause and look back at (Internet) history.

One of the paths to ‘guaranteed’ money pre-2001 was domain names. Back then there was no large-scale pay per click networks, and the only way to make money with a domain was to sell it.

One of those who benefitted was a certain Marc Ostrofsky. These days, Marc is active in the domain industry, backed by big names such as Howard Schultz (the big boss over at Starbucks). Yet what did Marc do to have such heavyweights believe in him?

Business.com

It was Marc who bought business.com and then sold it for $7.5 million. Or at least that is what we were told. Details were never revealed, but everyone believed the 7.5 million number. Any time domain sales are mentioned, business.com is mentioned as the biggest sale ever. Want to talk about .com madness from the 90s? Business.com sale. Even earlier talk of a web 2.0 bubble brings up business.com.

But just like YouTube.com’s 1.65 billion is all stock, so was the business.com deal.

Recently released Work.com was created by eCompanies, the same company that bought business.com. And a telling tidbit came out of the interview at Newsweek:

The $7.5 million was a stock deal that we did in 2000 when Internet companies were fairly highly valued. When we did our refinancing in 2004, that stock was revalued and we redeemed it for $2 million in cash. So it was $2 million.

Yep, you read that right. The actual value of the infamous business.com deal was less than 30% of the original value reported. I guess if we cannot clear the hype from the last dotcom excess, how can we do the same for the current mania?

Just like I asked before that people stop quoting the MySpace 100,000,000 user number, let the business.com $7.5 million figure die once and for all.