fxstreet.com’s Francesc has published a couple of very interesting posts about several Forex portals looking to sell out. He also speculated that this might be an indication of a crisis in the Forex portals market.
I have to disagree.
The Forex portals market, which I wrote about a few times already (here and here), is a very lucrative one but it’s much harder to enter than most people think. We see vast amount of Forex portals come and go and every day I get at least one press release of yet another new Forex portal claiming to be the next big thing. Most, if not all, of these portals will disappear within a year or two or will remain low-trafficked and obscure.
The market is dominated by several large and independent portals like fxstreet and forexfactory and couple of corporate ones like dailyfx and fx360. There are several more pretty large portals but these either focus on certain niches or are just content monsters with low quality articles and are nothing more than traffic and SEO traps.
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The Forex market (trading, software, content, etc) is a lucrative and often very profitable one. With the retail Forex market (brokers-wise) approaching its maximal potential, at least until China officially opens its gates, the focus is on the secondary markets – software and portals.
No doubt many people consider the Forex portal market as a very ‘hot’ one with endless opportunities there (this explains the meteoric rise in number of low-quality Forex portals). This also leads the owners of existing Forex portals to believe that they may receive very high prices for their domains. They might be right as the market is booming and people are always ready to pay extra in a booming market.
In this context it is interesting to see the comparison with the Forex brokerages market which is also very very ‘hot’. It is almost impossible to buy a Forex brokerage right now – shareholders simply either refuse to sell or set prices which don’t make any economic sense. Signs of a bubble? Probably.
It is unlikely that ‘big investment firms’ that some portal owner mentioned as a response to Francesc post will enter this market any time soon. With all the respect, even the largest Forex portals make no more than $1-1.5 million a year in revenues which makes this unattractive to anyone but private investors . Forex portals are also fully dependent on their advertisers – Forex brokers – which makes them very vulnerable and never independent (fxstreet made an important step in securing its own independence by launching a joint venture with Tradency). There is also a big issue of how you evaluate and price such an investment – it’s certainly not a common investment and there are no known precedents of exiting such an investment – so how do you determine the fair price?
My conclusion regarding the three portals up for sale? It’s a combination of coincidence and portal owners trying to realize their investment in a booming market.