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Humbled by T.R.A.F.F.I.C.

Domainer profit margins: Michael Gilmour of WhizzBangsBlog.com knows his business. He presented numbers (I love to see numbers) on Google’s traffic acuisition costs and the percentage of ad revenue shared between Google, domainers, and parking companies. Guess what? Google’s share has gone down (-29%), domainer’s have basically stayed the same (-3%), and parking companies revenues have increased around 45% (since Q4 2005).

What I love most about TRAFFIC East so far (on the second day) is how humbling it is for me. Many of these guys know what’s what and are exceptionally good at what they do. They are only beginning their adventures in the development space, but I suspect they will put today’s affilliate marketers to shame once they get going, and it won’t be simply because of their bankrolls.

What does it mean when domain parking companies are able to extract a 40+ percentage increase in ad revenue share from Google, while Google allows it’s own share to go down and domainer’s are not getting increases? It means Google needs traffic. It means domainers should lean on their parking companis, and challenge them to do better delivering the goods to their clients (domainers).

If you’re in SEO/SEM you know that, but did you really accept it? Was that knowledge you probably felt in your heart truly actionable info for you? Is your mid-term strategy based on the fact that Google absolutely needs more traffic than it has now, and is willing to pay for it?

Quality content will get rewarded. Professional committed web publishers will get rewarded, as fly-by-trend search engine spammers get dropped. Serious, commited efforts to increase the rich web experience for users will increase traffic, and will get rewarded by Google. I’ll leave for homework the question “How will Google reward such efforts”. Here’s a hint: T-R-A-F-F-I-C.

Word is, parked pages convert, but there are few standard metrics to prove it and a poor public perception of the quality of parked page traffic. I wonder, does that bad reputation come from the “talking heads” of SEM? Like I said, chatting with serious business people at TRAFFIC is humbling for me, and I wonder if those talking heads of SEO/SEM world are worthy of the impact of their noise making.

I had lunch with good people…. every meal, every break, every cocktail party so far has involved good people. The number one most obvious attribute so far is…. they do. They act. They execute. Keep it simple, and keep it going. Sound familiar? Of course it does. But how often do you actually see it vs. hear the words?

Dr. Christopher Hartnett of USA Global Link reminded the audience that entrepreneurs ar enot like corporate people. In 1926 a friend’s grandfather (a founder of Remington Amrs) bought an entire city block in Manhattan for $2 million dollars, as a means of securing the family wealth into the future beyond the success of Remington Arms? A four generation trust continued to buy property moving north from his city block. He bought 4,000 acres in Morristown, NJ as a back up plan, so that if there was a second Big Recession or real estate in Manhattan failed, the kids could live on the New Jersey farm and at least have food to eat. I used to live next to Morristown, NJ, and that property was sold off for $890 million dollars, still retaining 200 acres. The New York city block is still a depressed area not worth nearly what it could be worth.

This Big Picture story addresses our current perspectives, and how we base our “investment” decisions from our perspectives. Dr. Hartnett says your inner perspective is what you should follow, even though it is probably not well supported by those around you. In 1995 he looked at domains as real estate, and spent $5 million dollars building 5,860 websites in 1996. It was very difficult. People were negative, always trying to take away the dream. Don’t worry. Do what you know you should be doing.

He says there are 500 people in this room, and maybe 2,000 people in the world who own the potential of the explosive internet growth to come. He won’t sell any domain he has for less than $100,000 because they are simply worth a lot and more every day. Create a brand and the advertising potential in the 10 year term is unbelievable. A lunch table mate reorted moving 32 billion hits per month through his domain network. Right now. What will it be next year?

The world “global” translates into 16 languages as … “global”. The word “tv” translates into virtually *all* languages as .. you guessed it, “tv”.

How smart is this guy… I don’t wonder. Early industry equals no transparancy. Low transparency means arbitrage opportunities and profits for those who can execute on that. Maturity means increasing costs and bigger investments needs. That creates a development industry (e.g. real estate developers) who will be funded by larger entities that can manage risk (e.g. insurance companies). With that comes increased transparency and standards, which reduces margins. It’s all happening now for domains. It has happened in jewelry… as wholesale prices became known, the increased transparency created new markets, more efficient markets, etc. Opportunity to make profits exists in the interim, and we are in that interim period NOW. Wow.

Stuart Wood says development is 3 P’s : Plan, Passion, and patience. Enuff said.

Jonathan Boswell of LeaseThis.com says if you don’t actually do what your domain is about, then partner for the development with someone in that business. Good advice.

Here’s an interesting discussion of trademark infringement and parked pages… if you park e.g. igloo.com and the parking company does PPC and ads show for igloo coolers, can Igloo Coller company challenge the domain name rights via a UDRP and take it away? Yes, they can. generic domain name, but used in an infringing way, with no real case for it being used for non-infringing use. Bummer. Happened to the registrant of unlv.com, which was taken away.

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4 Responses to “Humbled by T.R.A.F.F.I.C.”

  1. TRAFFIC East 2007 Coverage at Dominik Mueller - Domain Name Brokerage and Consulting Says:

    [...] (Source: John Andrews’ blog) [...]

  2. Friday Tea Time - 10/12/07 » TheMadHat Says:

    [...] * Back on the serious note. John has a great post about being humbled at the T.R.A.F.F.I.C. conference and how we’re still in the interim with money to be made. Don’t make the mistake of thinking it’s easy. You need a plan and you have to stick to it. Think of it as playing poker. Stick to your methods and don’t randomly do things. He also notes things are looking up so get a plan and get going. To quote my favorite black hat…”Do It Fucking Now“. [...]

  3. Ben Wilks Says:

    Nice post Andrews I am very glad you have been humbled. Domainers are the next level of SEO, the smart SEO’s are now trying to get domainers as partners and I think the smart seo would be building the tools to these guys to help them develop their portfolios. Over time private advertising networks will pop up cutting Google entirely out of the picture. These are exciting times.

    Your comment “chatting with serious business people at TRAFFIC is humbling for me, and I wonder if those talking heads of SEO/SEM world are worthy of the impact of their noise making.” this is sooo on the money Andrew. A lot of big name seo’s don’t even get the domaining industry, you may know who I am referring to here. It’s going to be a game changer and I really think the seo’s that get the attention better move fast here of they will get lost and run over by quality gernerics entering the serps. Oh the fun, why scrape around doing seo for clients when one domainer could give you all the work you could ever need. Smart seo’s will become domainers and do it themselves, guys like Brian Proovst. They just need to shed the arrogance that comes across so clearly, they might get seo, but domainers get the whole internet. Big difference.

    It’s amazing to me how seperate seo and domaining still are. We are both on the same plight and the future is synergy between the two.

    Cool post Andrews and glad you made it to traffic, I have been on Ricks board for some months now and I am really enjoying the interaction with domainers. They don’t have the same arrogance that SEO’s do and they are a lot smarter about what they are doing. A real community that’s moving in the right direction. Domainers own the net from one end to the other I am sure, they are very Web savvy and many understand the net better than seo’s. The conversion of type in traffic is just the start and a good example of the myths that are commonly shrouded around domaining. Domainers don’t care YET, cos it means more domains for them. Wild times.

    John replies: I’m not so sure about that SEO not getting it thing… lots of the SEOs I know do get it. They aren’t the ones speaking at SES, though. And as for SEOs pitching domainers for work, it really depends on what about SEO is needed. Much of it is simply good webmastering, and some of it is commoditized. WashingtonVC is set up for domain development, and owns Dave Bascom’s SEO.com shop. They don’t need to hire any SEOs, do they? And private equity development…. get a search guy onto the project. More competition for search traffic is coming, and white label advertising channels absolutely, but search strategy is business strategy, and SEO is task work.

  4. Richard Ball Says:

    Hi John. You nailed the problem for domainers: “Word is, parked pages convert, but there are few standard metrics to prove it and a poor public perception of the quality of parked page traffic.” Most of the studies reporting good conversion rates actually pertain to “direct navigation” which includes bookmarked pages. Of course, bookmarked pages will convert well. The domain industry needs a valid conversion rate study that isolates parked domain traffic from other forms of traffic.

    Also, there are different types of parked domains, just as there are varying qualities of content sites in a contextual advertising network like Google AdSense. The problem from a PPC advertiser’s point of view, is that Google distributes ads to parked domains on *both* its AdWords search network and AdWords content network (See adwords.google.com/support/bin/answer.py?answer=50002 for details). Advertisers who opt out of the content network still get traffic from parked domains. This leads to the perception of click fraud. This hurts PPC advertisers but also domainers.

    What’s the solution? Just as AdWords advertisers have a checkbox for the content network (AdSense for Content), they need a checkbox for a domain network (which would distribute ads via the existing AdSense for Domains program). The fact that Google distributes AdWords ads via AdSense for Domains w/o giving advertisers control over where the ads display hurts the reputation of the parked domain industry. It makes it seem like Google has something to hide.

    To make matters worse, in the reporting interface, Google will detail individual domains on their content network but simply aggregate all domain clicks under a “Domain Ads” column. (See adwords.google.com/support/bin/answer.py?answer=66743 for details). Think about that for a minute. The company whose mission is to “organize the world’s information and make it universally accessible and useful” cannot (or will not) identify the individual domains that are sending clicks to PPC advertisers. Yes, advertisers can identify the domains via other means (like checking server logs), but again, Google is creating the perception of having something to hide by not giving this data to their customers.

    BTW, if a separate domain network choice did exist via Google AdWords to distribute ads on the AdSense for Domains network (google.com/domainpark), and, if reports for that domain network included the actual domains involved, I think PPC advertisers would use such an option. It’d be like having a distributed PPC search engine (where keywords are domains) and PPC advertisers wouldn’t have to compete with pure SEOs. ;-)

    John replies: Thanks Richard.  There is more too it, as Google is a business partner with the parking companies. That gives Google more leverage. I don’t see much future for parking companies if they will be squeezed by both domainers and Google. They are practically forced to game the system… which side will they align with? I can’t believe privately-owned parking companies would choose publicly-owned Google, but public parkign companies or passionaless ones would ride this out with Google until it isn’t profitable any more. Of course I know some parking companies are in the space as a means of getting organized post-domainer, which is a whole different story. How much do we here about data mining in that space? Yeah… surprisingly little. Of course the entrepreneurs are figuring out where to take the parking company.

    As for SEO vs. PPC and separate ad networks, the private brand ad networks are already in test in a lot of places. Quietly, behind the scenes so as not be be in-your-face competitive with Google and its partners. I expect to see commercial products by summer ’08 *if* Google hasn’t locked up too many barriers by then. Sometimes the most amazing thing to me is, the big brands do the most advertising and the big brands need the big domains. Google doesn’t control either (yet), it *only* controls the audience (traffic).