Berk Sure Has A Way

Putting my mouth where my money is.

Marchex Mania on Mad Money!

with 5 comments

Jim Cramer took a breather from pumping Marchex’s stock and on 3/7/06 gave some airtime to the often insightful Herb Greenberg. Herb was bearish on MCHX and made some of the same points I’ve made.  He said that their core business isn’t growing, domain names are their one good asset (and in perpetual beta), the domains business is not a long term growth business, and that Marchex is a “manana story” – always promising growth tomorrow.

Apparently, Cramer is a buddy of Marchex CEO Russell Horowitz.  On 3/2, he did a phone interview with Horowitz packed with softball questions.  My favorite was when Cramer asked “Do you have any competition at all?”  Russell responds “in some parts of our business, but nobody has the same combination of assets…”  That is a lot like saying that no one has my fingerprint!  Horowitz claims synergies between the businesses, but as one of my previous posts outlines, Marchex will not be able to monetize their own traffic better than Yahoo can so the synergies are limited.

Cramer is a smart guy and apparently a great trader.  Marchex has been a great investment for intrepid longs but not since Cramer picked it.  In this case, I think Cramer is wrong and Greenberg is right.  To add some food for thought, I will highlight a list of competitors for Marchex’s sprawling mini-empire of sub-scale businesses.  In most cases below, Marchex business is not even in the top 3 competitors!

Enhance (Tier 2) / GoClick (Tier 3)  – Syndication Business
  Tier 1: GOOG, YHOO
  Tier 2: MIVA, LOOK, INSP, ASKJ, Kanoodle – see Miva’s disastrous earnings report!
  Tier 3: INCX, EPilot, 7Search, BrainFox, GenieKnows

TrafficLeader – Outsourced Platform management
  MIVA, LOOK, INCX and other smaller players

TrafficLeader – SEO and Search Engine Marketing management
  Hundreds of companies – As a starting point, all the members of SEMPO (e.g. Efficient Frontier, Did-it, Bruce Clay, etc.)

Name Development – Subject Based Direct Navigation / Domains
  Bookmarks, anyone with a branded URL or existing traffic, browser navigation, search engines

Pike Street – Locally focused direct navigation (zip codes and Yellow.com)
  All yellow page players, GOOG, YHOO, INCX (Local.com), CitySearch, oodles of startups

Industry Brains – Publisher specific monetization
  Direct: Adbrite, Google OASU, Federated Media, BlogAds
  Indirect: Doubleclick, 24/7 Media, Yahoo Publisher Network

I own puts on Marchex’s stock.

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Written by Kevin Berk

March 14, 2006 at 4:07 PM

Posted in Products

5 Responses

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  1. Has Cramer read through the list of domains Marchex bought? It’s pretty shocking…

    David Eastbrook

    March 15, 2006 at 1:00 PM

  2. Just came across your blog vis-a-vis your comments on 10q regarding Marchex. Excellent work, and quite diligent in your crusade.
    As a fellow investor and blogger, I appreciate someone that’s willing to peel back the layers, particularly when taking a contrarian stance.
    Kudos.

    Jason Wood

    March 23, 2006 at 2:36 PM

  3. David – I don’t think Cramer has done too much due diligence on Marchex, he seems to have the Russ is my friend and is savvy, therefore MCHX is a buy. Their portfolio is good overall, but is a mix. Some of the domains will lose value over time and some will need to be sold. Overall, still their best asset but not really a long term grower

    Kevin Berk

    March 23, 2006 at 4:02 PM

  4. Jason –
    Thanks! I appreciate the kudos. While my MCHX positions have not panned out yet, I feel the stock decline is inevitable. I checked your blog and I am a fan – your post on Oracle and Open source was great.

    Kevin Berk

    March 23, 2006 at 4:04 PM

  5. Ben Edelman claims spaware delivered click fraud is rampant at Marchex.
    How will that effect not only earning but their relationships with their A grade customers when they find out?
    http://techlawadvisor.com/images/Revenue_Installation_Litigation.pdf

    Scam Buster

    May 12, 2006 at 4:05 PM


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