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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It is possible to make a ton of cash by sending visitors directly to the merchant’s website when doing affiliate marketing.

Quite a few affiliate marketers do this with Google Cash or a method known as arbitrage. This is where the affiliates advertise in any pay-per-click search engine such as Google Adwords, and send the traffic directly to the merchant’s website using their affiliate link.

If the visitor that clicks the link in the Google ad subsequently makes a purchase at the merchant’s website, then the affiliate marketer will earn a commission.

This method does work, and there are people who are silently making millions from this method of affiliate marketing. It is quick, hassle-free and can be extremely profitable if done correctly.

However, I personally think that affiliate marketers who profit from arbitrage could end up throwing away a lot of money, perhaps much more than what they are earning.

Here is the reason why:

Credible studies show that as much as 85% of online shoppers don’t buy a product they find online within the first 60 days. Studies also reveal that most online shoppers only buy a product if they see it quite a few times, i.e. if they are “reminded” about the product numerously.

I personally believe the studies are true, and have witnessed it so many times in my Internet marketing experiences over the years.

Now think about it. When you use the arbitrage method of affiliate marketing as mentioned above, you only have ONE chance of profiting from any purchase made by the visitor.

If the visitor chooses to just browse the merchant’s website, do the research and then make a purchase at a later date, the only person who makes a profit is the merchant.

However, if you had built a credible review website or brand that provides genuine product/service analysis and recommendations, the customer would most likely visit your website as a last minute check just before making that important purchase.

This way, when the customer has their wallet out and credit card in hand, you will be the one sending them to the merchant’s website via your affiliate link.

This way, you not only profit from the 15% that will buy immediately, but also from the 85% that buy a few days or even months later.

Now some will ask… what about cookies? Well yes, some merchants’ websites will set a cookie on the customer’s computer. The merchant will track the cookie and will reward the affiliate marketer if the customer comes back to their site and make a purchase within a specific period such as 60,120 or even 365 days.

However, with a prevalence of short-duration cookies, and even shorter attention spans, most visitors will never visit the merchant’s web site again, even with your cookie still saved on their computers.

If you were to depend on the same visitor to click on your Adword several times before making a purchase after sufficient exposure, you may end up making a loss, as your acquisition costs may exceed your commission from the one sale.

I could write all day and list points after points as to why you need to build your own brand on a premium domain name when doing affiliate marketing.

It is like killing two birds with one stone. You benefit from the exposure to your website and brand, as well as profiting from any affiliate commissions earned.

Don’t even forget that your branded website will benefit from free search engine and directory traffic, customer loyalty and word-of-mouth and other viral marketing methods.

Also, one last point, when your website has great content and product endorsements, the said visitor may end up buying more products from other affiliate merchants that you recommend, earning you even more money.

It pays to brand. It pays to own a premium domain name. Don’t underestimate the power contained within a premium domain name.

So, the answer is yes. You do really need your own domain name.

Successful eBusiness starts with a top quality domain name.

Find the perfect premium domain name to brand your online business at eBusinessDomains.com.