Founders Investment Banking sees niche sites as “new real estate market”
By Allan Maurer
BIRMINGHAM, AL – A Birmingham investment firm has found gold nuggets in the foothills of the Internet. Founders Investment Banking Managing Director Zane Tarence says the advertising industry’s desire for niche audiences and trackable responses to its campaigns has made some Web sites reaching those audiences extremely valuable.
Established in 2003, Founders Investment Banking has 13 professionals and three practices. Founder and Managing Partner Duane Donner handles its traditional economy practice. Another partner runs its real estate practice. Tarence handles the technology practice, which is focused on selling those niche Web sites. “I’ve sold four since January and there are four more in the pipeline,” he tells TechJournal South.
He says the firm’s “sweet spot” are properties that sell for $7.5 to $25 million. “Corporate and financial buyers, large investment funds, and strategic buyers want to see growth and a Web property generating a little more than $100,000 a month as attractive,” he says.
“Two types of entrepreneurs are coming to us,” he adds. “One type is the technologist. They’re smart young folks who understand search engine optimization and know how to build traffic. The other type are people from traditional publishing. They’re good at writing compelling copy and content. People come to their sites to get information about a niche.”
Putting the two together can create a strong business model, Tarence says. “You take great content, match it with technologists who know how to build traffic and then monetize it.” The shift of advertising from traditional media such as newspapers, magazines, radio, and TV has made niche sites that manage all three worth a great deal to certain buyers, Tarence says. “People go to trusted sites as a valuable source of information.”
A recruiting site that posts vitas of nurses, for instance, might have 50,000 visitors a day. “If you took that proprietary inventory to local hospitals, you could get a recruiting fee of $15,000 for each nurse hired. So, a strategic buyer might be a recruiting firm interested in that industry,” he explains. Advertisers want to sell to those niche audiences, he adds. “Internet advertising has already overtaken outdoor and will surpass radio this year,” he notes.
Having visitors register for a site or sign up for a newsletter increases its value to buyers, he says, much as paid circulation is a desired aspect of traditional media buys.
“We help a lot of people get their sites ready for sale. We don’t just take deals ready for harvest,” Tarence says. “A lot of entrepreneurs have a great property that needs tuning up. We bring in help to take that site to the next level. If they can become a certain thing for a specific market, we can make a lot of money from that.”
If the site has that potential, “We’re open to helping them get capital or liquidity. It might need money to buy tuck in sites, and we’ll provide capital for a site like that. He puts it in terms of a real estate metaphor. “You may not have built out your site yet, but it’s good land with a lot of people driving in front of it every day.”
“How many people go to Google to buy a book,” he asks? “They don’t. They go to Amazon because they’ve built a brand. Dot coms are better defensible positions than a patent. Down the road, dot mobi will be important, but right now, domains are huge.”
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