Facing The Absurd

the absurd side of domaining

Posts Tagged parking

Will Google DARE to kill the redirect?

Sep 4

Posted by Sisyphus in Domaining | 4 Comments

And why it should be in every domainer’s interest to prevent Google doing this…

Few weeks ago Sedo started circulating an email to its publishers recommending them to switch their domains to DNS parking saying that its upstream feed provider (i.e Google) may soon stop accepting traffic via redirects. This would obviously make traffic splitting/optimalization services such as Above or ParkLogic obsolete since they rely on the ability to split traffic. I see Above for example as the most revolutionary thing to come up in domain monetization in the last two years. Because it makes it possible to simply and automatically send traffic to the parking company that pays best and takes all the hassle with testing away.

So why does Google hate/fear the redirect so much? Well, Google has often said that redirect traffic is more often fraudulent than traffic where the domain’s DNS sits on the DNS of a parking company, which is in itself very questionable. I believe that the main reason though is that services such as Above take away part of the control Google has of the domain channel ands screws up it’s TQ/shaving algorithms. Also it would make life for new alternative monetization solutions much more difficult – since they rely on Google/Yahoo as a potential backfill for traffic they cannot sell for a higher price. Google is aware that its two main strengths against its competition are a) its superior monetization of the long tail and b) its international coverage. Any new monetization service cannot match it in this, but it can compete in various traffic niches. Hence I believe Google wants to raise the barriers to entry – this is obviously another example of potential antimonopolistic behaviour.

What is also potentially funny about this is that, as the owners of Above have told me, Google parking companies have actually won more traffic at the expense of Yahoo one’s – in essence due to the very existence of redirect parking. Secondly, do you think it is a coincidence that Sedo was the first company to actually send its publishers this email and why haven’t other G-based companies done the same? My belief is that Sedo has lost a lot of marketshare due to Above to its arch competitor Namedrive, which has outmonetized Sedo often in its core international markets. So in a way it is in Sedo’s interest to lobby Google to ban the redirect. Because if more domainers migrate to Above that is potentially more lost marketshare.

My hope is that Google will not implement this change. It should be your hope as well as a domainer.

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Mobile type-in traffic

Aug 11

Posted by Sisyphus in Domaining | 3 Comments

With the huge boom of smart phones there has been a huge surge in mobile type-in traffic. The sad part is that no parking company has become inventive in monetizing it.  Mobile traffic is very specific and shouldn’t be monetized in the same way as standard internet traffic, not just only because of the specifics of the devices themselves, but also because of different browsing habbits. The big secret is that mobile traffic is more valuable than standard internet traffic, but no parking company is properly exploiting this to the benefit of domain owners. Pause for thought - my friends at the parking co’s…

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Fighting upstream feed provider exclusivity

Jul 23

Posted by Sisyphus in Domaining | 3 Comments

Just wanted to bring up an issue that is not often discussed because the current situation is simply taken as for granted – that parking companies are always hostages of one upstream ppc feed provider – that being either Google or Yahoo, which they have to deal with exclusively. Since they know that the relationship is key to their existence, they are very limited in other ways how they can monetize their partners’ domains (the only exception is banned domains for which they can bring in second tier feed providers etc). This prevents innovations in domain monetization.

This arrangement is severealy hurting domain owners and my belief is that certain anti-monopoly style authorities should look into these arrangements. For example I believe that if parking companies would be able to mix both Google and Yahoo together (even on one results page), there would be roughly a 20% uplift of earnings for domain owners. It would also force G/Y to pay out more because they would be competing head-to-head for every click. However both G & Y force exclusivity onto the domain channel with every parking company. There are companies that have both feeds – such as Infospace – but those cannot be used on the domain channel. If Infospace can have both, why not the parking companies?

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Parking page blindness and the inverse relationship betwen socio-economic development and click rates

Apr 18

Posted by Sisyphus in Domaining | 4 Comments

One thing I have never heard much said about in the domaining industry is the phenomenon of parking page blindness. I.e as parking pages become more profound they are starting to get more and more ignored by users. When we look at how parking earnings declined over the last two years, the major factor behind it is the fall of CPC’s (and everybody is well aware of this). However CTR’s have also declined in this period, which has also contributed to the fall of earnings.There seems to be less of an awareness of declining CTR’s in the industry.

It is likely that the cause behind this is what I am call parking page blindness. As people get more accustomed to landing on parking pages, a large part of them immediately understand that they will bring little value to them and leave, costing us, domainers, a lot of money.

Since I am a big data junkie, I have found that there is an inverse relationship between socio-economic development and click rates on parked pages. I.e countries that are less economically developed and hence it is likely that the internet population has not been online as long as their counterparts in the western world, they have also less experience with dealing with parked pages. Hence they are more likely to click. For example I have found that traffic coming from certain african countries can generate 3x the amount of clicks than, say, the same amount of western european traffic.Although CPC’s are much lower in Africa, the extra amount of clicks can even make the RPM higher than in certain west european countries.

The whole concept of parking page blindness is obviously a big threat to the domaining industry. However there are obviously ways how to fight it such as making parked pages more stickier, introducing display advertising which is generally sold on a CPM basis, bringing in zero-click etc. I hope the parking companies are aware of this.

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Sedo’s parent, AdLINK Group unveils 2009 financial results

Apr 4

Posted by Sisyphus in Domaining | 2 Comments

I read a brief post on DNW.com about Sedo’s annual results, so I wanted to look at the whole annual report in more detail, it can be found here. AdLINK is really composed of two divisions, the first being affili.net and the second being Sedo.

Unfortunately there isn’t too much information regarding Sedo itself, such as it’s gross margin and costs (only group costs can be found), so it’s really difficult to judge how well Sedo is really doing. The only interesting number is Sedo’s revenue for 2009, which came in at 46.6 milion EUR. That was a fall of 14.8% in comparison to 2008, when revenue came in at 54.7 million EUR.

The big question is what this revenue is really composed of. My assumption is that Sedo books only its 10% sales commission as revenue but books its entire parking revenue as revenue. I.e what it gets from google is counted as revenue and what it pays out to parking partners (domainers) is cost of goods sold.

If this would be the case, brokerage commissions amount to probably 7 million EUR of the total revenue (Sedo says it sells $8 million worth of domains a month) and the remainder, about 40 million EUR revenue would come from parking. That’s about $52 million a year, or less than $5 million a month.

That’s pretty small and it seems that in fact Oversee is an even bigger leader in domain monetization than I thought, probably being more than double the size of Sedo in terms of monetization revenue. Conversely, Namedrive looks like it’s coming much closer to Sedo than I previously thought.

I don’t want to pronounce Sedo as the laggard of the domain industry yet, but it seems like a former champion of the industry is losing out in the battlefield, at least in the short term.

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Can PPC fall further?

Mar 29

Posted by Sisyphus in Domaining | 6 Comments

The last 2-3 years have been tragic for the parking side of the domain business.  Parking earnings have probably gone down by an average of 60%. Can they fall further?

We should probably look at the main factors behind the fall in ppc on the domain channel in the first place to able to make a good judgement:

  • GOOG/YHOO cleaning up the domain channel’s traffic quality alongside with the parking companies. Within the domain community there has always been this belief that domain traffic quality is absolutely outstanding in comparison to search, which is usually based on one stupid report from Efficient Frontier. As a whole, domain generated traffic is worse than search for sure, there are just certain domains/verticals where traffic quality is indeed better, but this cannot be generalized for the whole channel. GOOG/YHOO have worked hard on establishing what domain traffic converts and which doesn’t and have established mechanisms to penalize bad traffic.
  • Along with this clean up payouts have been cut using some kind of quality control mechanism. Although being a black box, it is likely that bad traffic is penalized in financial terms but also good traffic is not rewarded, or at least not rewarded enough.
  • Advertisers are now easily able to exclude the domain channel from their PPC advertising campaigns. That is also a pretty recent case.
  • GOOG/YHOO simply taking a bigger cut. One thing is what the parking companies rev share is in their contracts, second being the real rev share that takes into account the “black box”.
  • Advertisers are more capable of measuring the success of their ppc campaigns. More and more advertisers measure conversions etc. This again is connected to traffic quality I mentioned above.
  • The general economy. Not really necessary to explain.

The good news is that parking earnings have stabilized in the recent months, or at least they are not in free fall anymore.

So I think there is light at the end of the tunnel because a new “equilibrium” is being reached with the major cleanup of traffic quality and PPC should even increase as the economy improves. With the massive previous fall of PPC, other ways of monetizing domain traffic are suddenly kicking in. For example, I am now selling over 5% of my traffic directly to advertisers and I just started sales in January. I haven’t even started to fiddle around with affiliate stuff yet, which should bring another slight boost.

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Is the battle to control the entire domain ecosystem simply flawed?

Mar 13

Posted by Sisyphus in Domaining | 4 Comments

In the last 2-3 years there has been a trend in the domain biz that I have been puzzled about. The big players started a push to control the entire domain ecosystem. Apart from parking, they wanted a registrar, an aftermarket, a conference etc.

I think it was the wrong choice that stemmed more from the empire building will of management/owners than strictly looking at ROI and ROE of shareholders. There was a promise of up-selling/cross-selling but that never really materialized. Instead the big players lost focus of their core businesses. Plus the acquisitions to control the entire ecosystem often turned out very sour.

Let’s start with Oversee for example. They shelled out several tens of millions for snapnames and Moniker. Snapnames few months later lost its vital Network Solutions contract and a few months ago the Halvarez scandal broke out. Moniker was also bought at the height of valutions. The amount of gross margin that these two companies contribute to Oversee.net is absolutely miniscule in comparison to its owned and operated portfolio and it’s monetization service DomainSponsor. Imagine that instead of plowing this crazy money into acquisitions, Oversee could have invested into its core businesses. It could have acquired more portfolios and invested into better monetization. In my opinion that kind of investment would generate much more substantial ROE for Oversee. Don’t also forget the time spent to integrate the new acquisitions.

A similar example is TrafficZ with its buyout of DomainTools that ended very sour as well – they are fighting former owner Jay Westerdal in court now. Aftermarket.com is home grown project but you cannot really talk about success there either. The Domain Rountable conference is losing traction as well.

Pretty much all the other big parking co’s played this game as well, maybe to a smaller extent though. One exception is Namedrive which kept its focus predominantly on monetization. That’s one of the reasons it has grown so rapidly and became a substantial player in monetization.

Wisdom of the day: Don’t let your Ego into strict business decisions.

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The goldmine in the data and its potential implications for domain parking

Mar 7

Posted by Sisyphus in Domaining | 3 Comments

I am fairly critical about the lack of evolution of the domain parking industry – it really hasn’t evolved much in recent years. Since PPC has fallen so sharply, it still is a puzzle to me why parking companies are not becoming more inventive when it comes to monetization.

One area I see completely unexploited is behavioural targeting on parked pages. When you look at ways how parking pages are optimized is is really all about contextual targeting. You basically have a universe of users hitting a particular domain, you optimize the ads based on the the domain name, what users are clicking on and maybe on location. However the point is that if you would take the universe of all US users hitting the domain for example, they would be all shown the same ads. Why not actually target the ads more to the particular user, for example based on his interests, gender, age etc and mix this behavioural targeting with the standard contextual targeting?

Parking companies themselves collect massive amounts of data by which particular users could be categorized. They could also partner with big ad networks that have collected even bigger swaths of data such as Doubleclick. Then use this data to improve targeting and monetization. If big e-commerce sites such as Amazon or Netflix can exploit this data, I don’t see a single reason why the parking companies couldn’t. This data is a potential goldmine that is just waiting to be collected by somebody.

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Looking at Bido, it seems pretty damn hard to build a new viable aftermarket platform

Feb 21

Posted by Sisyphus in Domaining | 29 Comments

I was just looking through Bido at the recent sales page. Since Bido get’s so much PR and buzz, I was really surprised about the miniscule amount of volume in dollar terms. Looks like on a typical day maybe $1,000-$1,500 of sales go through. That’s $100-150 of margin for Bido a day. And a hell of a lot of effort is put into that from Sahar’s team with no doubt to even get that result. I don’t really want to show off or anything, but just to put that number in context, I make that kind of money in less than 10 minutes, 24 hours a day, just from parking.

What the example of Bido clearly shows us is how difficult it really is to create a new viable aftermarket platform and especially get the model right. I think Sahar&co will really have to fundamentally change Bido’s model and I sincerely wish them a lot of luck, because any efforts like this help increase liquidity, which is always positive for all of us.

Overall, if you look  at the various aftermarket platform models, I think only some work very well, some moderately and some don’t at all.

Somebody who I think got the aftermarket model working really well is Namemedia with BuyDomains etc. Why it is so nicely profitable is that to a large degree, Namemedia is what I call in the business of proprietary domain trading. They own the inventory (or most of it) that they sell, hence their margins are really thick. Whereas others just rely on their 10% cut, Namemedia takes almost 100%. That’s why they can market their names proactively. Dark Blue Sea has been trying to do something similar to that with it’s Domain Distribution Network, but they are clearly not even close to as good as NameMedia is on this.

Another aftermarket model that I think makes a lot of sense is the dropcatching-to-auction model of Namejet, Snapnames and Pool. If you create liquidity in the marketplace, you can snap up domains for $7 and sell them for $79 or even thousands of dollars. Obviously most of the inventory comes from preferred registrar partnerships so the margins are not that high (as they have to give a big chunk to the registrars), but these dropcatching services definitely take a bigger cut than 10% that for example Bido or Sedo rely on.

Rick Latona gets it right as well through his whole aftermarket package (newsletter, auctions, active brokering). He also engages in what I call a lot of proprietary trading, a lot of the inventory he sells is his.

To a lesser degree I don’t think the whole marketplace model of Sedo (on a standalone basis) is that awesome and profitable. On a typical month, Sedo sells something like $6 million in inventory, with a 10% margin of $600k roughly. However Sedo has a HUGE overhead to keep this operation running, spends significant amounts on marketing etc. There’s probably very little left of the $600k a month after all the costs. However why this model seems to work is the marketplace’s impact on Sedo’s parking business. Because of the marketplace, Sedo gets a lot of parking business, where it can make thicker margins. Pretty much all the small guys making $50 a month on parking park with Sedo now, but they probably have thousands or maybe even tens of thousands of them so it adds up. The impact of the marketplace on the parking side of the business is exactly why Namedrive went into this business with its NDX Market. Overall clearly, on a standalone basis, the marketplace model is nothing very profitable.

So bottom line is that if you want the marketplace model to work, you really need some kind of upsell to make it work – to parking, a registrar or something like that.

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Industry consolidation

Feb 19

Posted by Sisyphus in Domaining | 2 Comments

It’s likely we’re going to see some industry consolidation this year, probably at least one “blockbuster deal” for the industry, maybe even two. So what are my thoughts on this and what I think should happen?

I think this “blockbuster deal” will somehow involve Namedrive. Namedrive is the fastest growing parking company, they are very aggressive, smart and flexible. They have a strong foothold in Europe. They have a lot of expertize in monetizing international traffic (international traffic is the next battleground me thinks), especially using the AFD feed. My personal thought on this is that Oversee.net should take over Namedrive, it would be a pretty good fit. Oversee has just opened a Frankfurt office and they are clearly signalling they are interested in Europe. I think Skenzo could be a buyer as well. Sedo probably not, the antipathy between Namedrive and Sedo is simply too big.

Also, I see Fabulous really getting marginalized over the last 2 years. I think it’s an option for them to sell the parking side of their business. Could be a nice scoop up for Sedo, which seems to specialize on these smaller bolt on deals (e.g Parking Panel, acquiring the parking biz of Dotster etc).

On the Yahoo! side of the fence I can see potential of something happening. I can see Skenzo being acquisitive, they have the institutional capital and can make a move. Parked.com would be a decent target I think, it’s relatively small, could be picked up well and would be a good fit. HitFarm/Reinvent won’t probably take part in these consolidation games.

And then there are the deals that look unthinkable at the moment, but could happen. Oversee.net is probably looking for an exit eventually. It could be bought by somebody, likely coming from outside the direct domain business. Why not Google for example? Sounds crazy, you can never rule it out though. Could be an ad network as well, would be a pretty decent fit. Why not Verisign. Sounds even crazier. But they clearly have the fire power to do it. Something similar could happen with Sedo as well.

I’m just really thinking out loud here what can happen….

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