Over the past few weeks I have been analysing the domain parking model in these domainer musings posts, in a bid to illustrate why so many domainers are hooked in domain parking land.

This series was inspired by a seemingly unwillingness of the masses to accept that domain parking and web development are two extremely different models.

Anyway, you can click to read Part One and Part Two. I am writing these posts solely from my point of view, so please do not accept anything as fact.

Last week I touched a bit on Arbitrage in the domain space. Domainers profited heavily from arbitrage by buying cheap traffic and selling it at a higher price. They would open up PPC campaigns with cheap search engines, send the traffic to parked domains serving ads from the likes of Google and Yahoo who would normally compensate the domainer with higher Revenue Per Clicks.

Some took it a bit further by buying traffic on cheap keywords, only to send the said traffic to landing pages populated with ads for unrelated but more financially rewarding keywords.

To understand the potential of this form of arbitrage (domain) you have to realise the more traffic you bought, the more money you could make, you could use unlimited domains and use just about any domain name despite the quality and/or domain extension.

This was happening in the heyday of domain drops, when all domain registrars were still dropping great domains. So for many domainers, they were in the right place, at the right time.

If any thing can be said about the domain industry is that domainers will do whatever makes them money, for as long as they can. One such act is the registration and selling/parking of typo and trademark domains.

Now in the case of arbitrage, it was a licence to print money for many. The more money they made, the more domains they acquired, and the more traffic they bought. It also meant that more and more domainers were getting in on the action.

Now, to understand where I’m going with this, the only thing you have to do is to look at arbitrage from the advertisers point of view. Then everything else will become clear.

Imagine what would happen when advertisers realise that they are spending the bulk of their search marketing dollars buying “recycled” traffic? It is recycled in the sense that it is not original. The domainer bought it from a cheaper search engine and then sold it to them via Google, Yahoo etc.

The key thing here is that the advertiser would ask is, why buy recycled traffic, when I can go straight to the cheaper source?

The other thing as well is that if a domainer buys traffic for “horse shoes” (keyword) and sells it to an advertiser marketing their mortgage products, then chances are, that traffic will be useless. Useless traffic in this case would simply be a waste of money to the advertiser, but enrichment to the domainer. Getting the picture?

If advertisers had no way of guaranteeing the quality of traffic, and/or continued to receive less value for money, then they would abandon search marketing and advertise elsewhere.

This could render search marketing as an unreliable advertising channel. This would not be good for Google and Yahoo.

As for Google and Yahoo, there were 2 main threats.

Firstly, if advertisers discovered the cheaper source of traffic, then Google and Yahoo would lose money.

The other threat is that if search market is compromised by arbitrage, then the main source of income for Google and Yahoo would become very uncertain.

So, the plug was pulled, and tighter search marketing rules were introduced. These include the rules where advertisers can only purchase ads for keywords relevant to their sites, the destination of the ad has to be domain shown in the ad, and well of course arbitrage was outlawed.

An email I receive from Yahoo earlier this week was of perfect timing. The email was regarding a Notice of Class Action Settlement. This email which you can read here (PDF) will help to legitimise my opinion that arbitrage posed a very severe threat not only to domain parking, but also to search marketing as a whole.

As I have taken the time to provide a copy of the email in PDF, I won’t be describing or discussing the email. It is fairly easy for the average mind to understand it.

However, for the purpose of this article, here is a quote:

”This class action was brought in 2006 by several Yahoo! pay-per-click search advertising customers. They allege that customers contracted for targeted ad placements through two products, “Sponsored Search” and “Content Match” (and predecessor products provided by Overture Services, Inc. and GoTo.com, Inc.) and that Yahoo! breached its contract with its customers by allowing Yahoo! ads to be displayed in spyware, domain name parking sites (also known as bulk registration sites), pop-ups, pop-unders, and typosquatting sites. Plaintiffs brought claims for breach of contract, unjust enrichment, misrepresentation, civil conspiracy, and unfair business practices.”

In a nutshell, what you need to get here is that regardless of all the domaining trumpets and megaphones been blown and sounded, domaining is still viewed as shady business by the masses.

As a matter of fact, the only people that seem to have respect for domaining are domainers themselves. Yes, we have had the million dollar sales, lavish conferences, a robust domain aftermarket and a few respectable players, but at the end of the day, the domain industry’s reputation is still far being credible and acceptable to many.

So a lot of advertisers would squeal at the idea of their ads showing up on parked pages. As per the Yahoo Notice of Class Action Settlement email, advertisers seem to have a general mistrust of the domain space.

I am going to end here. Would love to hear your thoughts.

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At the time of reading this it should be Saturday again!!

At the time of writing, it’s Tuesday night. I am quickly writing a post to be auto-published for this week’s domain musings as I have an all-week conference to attend that will also last all weekend.

So these are not necessarily musings, but rather a follow-up on last week’s post.

Domain Parking
Last week I presented a simple illustration as to how one could easily generate serious revenues via domain parking. Domain parking perhaps, is single-handedly responsible for the survival and growth of the domain industry.

Domain parking gave the domain aftermarket a lifeline, by providing the basis on which a lot of domains got traded between domainers. Very few domains are sold to end-users based on their branding potential. This means that the bulk of domains are sold based on their domain parking earnings potential.

In some cases, domains were been sold for as much as 6 times their annual domain parking revenue.

I am going to present 2 scenarios here. Firstly I will look into the reasons why selling domains based on domain parking revenues makes sense, and then the reason why it is just risky business.

Selling Domains Based on PPC Revenue
What makes the domain name extremely attractive is that for successful investors, it is normally a case of a very low initial outlay (start up capital) producing massive returns.

With domains, you earn money by parking them and/or selling them. Now if a domain name makes $0.20 (20 cents) a day, it would be an average of $6 per month, $72 per year in revenue.

If you were buying the domain name at 6 times yearly revenue, then the selling price would be $432.

Now paying for 6 years worth of revenue means that you would have to wait 6 years to recoup your investment. However, if you then sell the domain name after a year, you can recoup your original investment easily. How?

Well you would collect $72 in the first year in domain parking revenues. If you sell the domain name on the same terms of 6 years’ revenue for $432, then you your profit would be $72.

If you are good at selling domains, then you might even earn more by adding a value for the domain branding potential.

The Risks of The Domain Parking Model
However, when I came across this method of domaining, alarm bells went off immediately. IMMEDIATELY.

This is high-risk investment. Seriously. How do you guarantee that the traffic stats are genuine and that the domain will maintain that level of earnings? Traffic can be easily faked. Click fraud was predominant a few years ago (and still is).

So almost nothing was credible when it comes to domain stats.. A lot of people tried to overcome this by asking the seller to give them a chance to test the domain on their servers/domain parking accounts. As a seller, this is something that I would never do. Waste of time.

Now, if the traffic was genuine, how do I guarantee that the traffic will remain high? This is where the source of the traffic becomes extremely important.

If the traffic is generated from back-links, then the links could be removed by the website owners as soon as they realise that the previous website no longer exists.

If the traffic is from search engines that had indexed the pages of the previous website, then the search engines will drop the pages as soon as they realise that the domain name is now parked.

The only domain name that would stand the test of time are those that users type directly into the browser. Domainers refer to this process as direct navigation. Personally, I have never bought into this direct navigation theory. I think it was just a term and theory invented by domainers to add value to domains.

Yes, I do believe domains like shoes.com would get natural type-in traffic. But anyone selling a domain like shoes.com based on its type-in traffic would be leaving lots of money on the table. Such names should be sold based on their branding potential and the credibility that they could offer to the end-user.

There are quite a few other reasons why I don’t sell or buy domains based on the domain parking model. I like to have a degree of control over my businesses. I like flexibility and the ability to introduce creativity and originality. Domain parking notoriously lacks any degree of transparency.

No man can serve 2 masters. Either you choose the “lazy” life of domain parking by choosing to become obsessed with stats or you use your intelligence, or common sense rather,  to market domains based on their branding power.

Now that domain  parking revenues have taken a nose-dive, the whole domain industry is scrambling to find end-users. But guess what? Most of the domainers hold crappy domains. They weren’t focusing on quality, but quantity. Thanks to domain parking.

Arbitrage
This is getting a bit long, after just 5 minutes of typing. However, let me mention arbitrage quickly.

A lot of domain investors who invested in domains based on their domain parking revenues did not mind paying 6 years revenue, as they could pump unlimited revenues out of the domain name through what is called arbitrage.

Arbitrage, in a nutshell exists in every form of business. However in the domain space, this is where one would buys cheap traffic and resell it at a higher price.

So, for example, someone would open a PPC campaign with a smaller search engine, buy the traffic for let’s say $0.10 per click and sell it for anywhere between $0.50 and $3. They would send the PPC traffic to their domain parking page.

This is how a lot of domain investors managed to amass large domain portfolios in a very short period of time.

However arbitrage is now outlawed in domain parking. People still do it, but if caught their domain parking accounts would be terminated.

Arbitrage had to go. Arbitrage in the domain space posed a very, very severe threat to the existence of not only domain parking, but to search marketing as a whole! I will expand on the dangers of arbitrage next time.

Have a great weekend!!

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There seem to be two sets of minds operating in the domain industry: those who get the concept of branding, and those who flatly refused to be weaned from domain parking.

Those who get branding are normally the ones who understand the importance of quality domain names, and possess the wisdom of choosing quality over quantity when doing domain investments.

I have been preaching the gospels of quality domains and branding form day one. But lets look at the reason why some domainers will never get it, or flatly refuse to accept it.

Domain parking provided a lot o people with a bottomless revenue source in its heyday. Lets look at some numbers.

Let’s say you had a $10,000 credit card, or better yet, that amount of money at your disposal for domain investing.

At the average $10 cost per domain registration, you could pick up 1,000 domains. Lets say you did the research and employ the right tools and resources to acquire domains that do get a bit of traffic.

Let’s further assume that this traffic was sufficient enough to earn you $6 per month per domain name, an average of $0.20 per day, per domain.

With 1,000 domains, that would be $6,000 in revenue each month, or $72,000 annually. Are you excited yet? You should be.

Remember that you are only earning 20 cents from each domain name on a daily basis. Pay attention. With $6,000 in monthly revenue, you have almost earned all of the monies invested in the very first month. You can repay your credit card fully after just 2 months.

That would be 720% annual return ($72,000 on a $10,000 investment).

Stocks hardly do that, and the banks couldn’t match that. Even real estate would struggle to come close.

Now if you were smart, you would reinvest part or all of your earnings into more traffic domains.

This is going to get complex now.

Lets say you reinvested 50% of your earnings each month.

Month One - 1000 domains  =  $6000 revenue

Month Two – 1,000 + 300 domains x $6 = $7,800
(300 domains = $6,000 revenue x 50% = $3,000 divided by $10 registration  fee = 300 domains)

I won’t bore you, but if you do the maths, you should get something similar to what the following table illustrates:

Please be aware that these are just assumptions, and there is a degree of impracticality in that domain parking revenues are not paid out until the middle of the following month, and domain research does take time.

At the end of the first year, you would have accumulated 17,922 domain names costing $179,216 in domain registration fees.

You would have earned  $445,962 in domain parking revenues by the end of the year, which would result in a profit of $266,746, before any interest and taxes.

That is based on the following:
- An initial investment of $10,000
- An estimated $6 monthly domain parking revenue
- An assumption that 50% of each month’s revenue is reinvested immediately to acquire new domains at the basic $10 registration fee
- An assumption that each new domain name acquired earns the same average amount in domain parking revenues ($6 per month or 20 cents per day)

Either you are excited or you are confused. The reality is, it is possible. But in order to consistently earn an average of $6 each month in domain parking revenues, you have to acquire the “right” domains.

The “right” domains are those with the right keywords, search volumes and Cost Per Click (advertiser) or Revenue Per Click (domain owner).

To obtain the right domains, you need to fully understand statistics, know how to research keywords and be able to decipher search statistics and analytics.

You wouldn’t need to focus on domain quality and branding potential. You would only need to focus on domains with traffic (by analysing stats) and the more traffic domains you have, the more money you earn.

This, ladies and gentlemen, is the reason why so many domainers focus on quantity instead of quality and fail so miserably in grasping the concept of branding.

With the above illustrations, you could avoid the complicity by simply investing $100, 000 in new domain registrations. If each domain name earns an average of $6, then you will earn $60,000 per month.

That would be annual revenue of $720,000, and at $100,000 in annual expenditure (domain registration initially, and subsequent yearly renewals); your annual profit would be $620,000 in profits before any interest and taxes.

You would collect $620,000 yearly by living the lazy life. Hmmm. Not bad, is it? And to think that you wouldn’t even have to sell a single domain name!

That’s how the “legends” could famously declare that they don’t sell domains.

I could go even further and complicate things a bit more by adding arbitrage to the calculations and assumptions, but I will save that for another day.

Oh how things have changed, eh?

I may write a part 2 to this blog post. However, without an explanation, I would advise you not to base your domain investments on speculations of what your domain parking revenues will be.

Have a great weekend!!

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I often get asked by friends or people that I meet, “what do you do?” This is a very simply question, but can be hard to answer depending on who you are speaking with.

As I do a lot of things, including real estate investing, stock market, foreign currency, affiliate marketing, domaining and being an accountant, it can be hard to answer this question.

As my main profession is in accounting, and I have been trained and working in the accounting profession since I was 16, I just normally tend to simply say that I’m an accountant. It’s not my favourite pastime or my main income steam, but rather my most recognisable profession.

Some weeks ago, at a party being held in a wine bar, I thought I would try something else. I responded saying that I’m an Internet Marketer. Wrong answer! I ended up spending the next 30 minutes trying to explain how affiliate marketing works. The average age of the people I was speaking to was about 30, not 75.

How hard can it be, to understand that you market other people’s products and services, and if you are successful in making a sale, you get a commission, which is simply a percentage of the sale or a fixed payment.

Now I have never told anyone that I’m a domainer. I simply don’t have time for that warfare. If people can’t understand the simple logic of affiliate marketing, then why should I give myself a headache trying to let them understand what domaining is?

I came across a blog post recently that gave me some quiet reassurance that I am indeed saving myself from wasting time. Even “experts” don’t seem to understand what domaining is.

In a blog post on InternetBusiness.co.uk, the author, Brian Turner writes:
” domaining is the process of buying nice sounding domain names, slapping a landing page filled with ads on, and then waiting to generate revenues from people clicking on the ads after typing the sites URL - or else from selling the domain at an inflated price when someone actually wants to develop a useful website on it.”

I left a comment to the article a few days ago, stating that I find the definition of domaining to be quite misleading. I copied the Wikipedia’s definition of domaining in the comment and suggested to the author that he attends one of the many domain conferences so that he may be properly educated about domaining. The comment is still not published, but I’m not surprised.

The domain name InternetBusiness.co.uk is a superb domain name, and the website has some well-written articles. The site is well maintained and gets a large amount of traffic. Brian Turner writes most, if not all of the posts. So I’m a bit disappointed that Brian would rather define domaining in such a negative way.

Now, in a nutshell, his definition is actually right. What I have a problem with, is how it could be misinterpreted.

Domaining, in general, as seen by the general public has more negatives than positive. Domaining squatting, trademark infringement, click fraud, domain theft, appraisal scams, domain tasting, unethical practices surround expired domains etc are just a few of the things that leave a bad taste in the mouth when it comes to domaining.

It would seem as if Brian Turner does not know or understand that domain parking and monetization is big business that is legitimately conducted by reputable companies that are traded on stock exchanges.

He also does not seem to have any respect or appreciation for the domain name aftermarket.

Now, I may be wrong or may have misinterpreted his post. I would love to hear what he thinks, and what you think.

Buying and selling domain names, despite the many malpractices undertaken by a few, is a very legitimate business activity. Domain parking, though currently under severe threat, is responsible for putting millions of dollars on the balance sheet of companies such as Google and Yahoo.

So then, how can we explain domaining to our friends, families and other contacts in a positive and dignified way?

It seems a bit too true, but in this domaining world anything is possible. There is a domainer that is making a killing, in what seems to be a domain niche that no one seemed to have paid any attention to for years.

This sort of daily income is normally reserved for the top expert Internet marketers. There are Internet marketers who claim to be earning as much as $100,000 (in profits) per day.

However, I have in the past made some really decent daily good income from domain parking. I recall making just under $4,000 in one particular day. Those days are now long gone, as I have sold the bulk of my portfolio, and domain parking is no longer king (in my opinion).

Our latest sponsor, $3000-A-Day Domainer, has published a screenshot of a parking account showing daily earnings above $3,000. They will also show a video to subscribers, and are promising to publish more videos and info regarding their secret.

I do not know the domainers behind $3000-A-Day Domainer personally, and have taken no steps to verify any of their claims. However, I really do think this is worth checking out. I have subscribed for more juice, and will be watching their space intently!

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