Unlocking Value Through BIG Data

20170703_bigdata

In this article, I’m going to let you into a little secret. You may not have heard of anyone else approaching domains the way I’m about to outline but in my opinion, it’s the future. These ideas are what keep me so entranced by domains.

Escrow.com

If you are wanting to extract the maximum amount of value from your domain names then the answer is in the data. It really doesn’t make a difference whether you are a buyer, seller, developer or traffic monetizer, the key to generating additional revenue always comes back to the numbers.

As I’ve spoken at conferences or written different blogs I’ve been accused of many things but there has been one consistent accusation that I’m actually quite proud. “You’re always banging on about the numbers!” I love my numbers and more than that, I love trying to interpret what they are telling me.

Over the past 10 years, my ParkLogic business partner and I have continued to be fascinated by domain names because the data tells so many different stories. We’ve taken this to the extreme level by tracking around 250 different metrics for every domain on our platform each day. This leads to hundreds of millions of data points that can be algorithmically analyzed and trend curves plotted over time to see where the next seam of gold will come from.

Continue reading
Recent Comments
Wolftalker
Interesting as always Michael. Congratulations on a good piece.
06 July 2017
mgilmour
Thanks for that!
06 July 2017
1467 Hits
2 Comments

Domain Management Video

Domain Management Video

This is the first in a series of videos that are a part of the 10 year anniversary of blogging. The videos released over the next couple of weeks will cover topics including:

  • The Problems With Development
  • Domain sales
  • Traffic domains

Escrow.com

In this video I discuss a number of pertinient domain management topics, including; business models, tracking against goals and the problems of scaling.

I hope you enjoy this series as I share my thoughts about some of the challenges with being a domain investor and more importantly what are solutions that can be adopted.

 

1211 Hits
1 Comment

Part 12 – Portfolio Optimisation – Dealing With Revenue Leakage

Part 12 – Portfolio Optimisation – Dealing With Revenue Leakage

In the last article I outlined a number of typical revenue leakage problems that cost domain investors real money. I also mentioned, from experience, around 10-15% of revenue is lost due to mismanagement. In this article I’m going to state a number of things that may be unpopular but nevertheless I believe them to be true.

For a start, generally speaking domain investors are very bad at managing their portfolios. There are exceptions to this rule but they tend to be few and far between. I believe the reason this is the case is domain investing seems really simple on the surface but as you dig a little deeper it gets more and more complex if you want to keep on top of everything and extracting the full value from your assets.

Many investors need to recognise what they are good at and what they aren’t. I’ve met some absolutely brilliant individuals that seem to be able to find the gold traffic domains but to ask them to change a nameserver is almost impossible. While other people are amazing at negotiating sales but once completed the actual transaction of moving a domain to the buyer is the last thing on their minds…..as they’ve already moved onto the next deal.

The problem with domain management is that it’s just not sexy. The mechanics of making sure domains are where they should be, nameservers are set correctly and you are actually collecting the cash requires an exceptionally detailed mindset.

There are some really obvious things that investors should do with their portfolios. For example, I’ve aggregated all of my domains to the registrar, Epik, as they provide an easy service for pulling all of the domains from different registrars back to them. It eliminates one of the possible revenue leakage opportunities….and I’m into that!

Next, outsource all of your domain management to a company and pay them a few percentage points of revenue. This is exactly what we do for a growing number of clients at ParkLogic. Sure, I’d love you to use our service but if there is anyone else that provides this high touch solution then feel free to go with them.

A good management company will mean you have a single nameserver to set your domains to and they will route the traffic to everyone else to optimise the best performers. They will also monitor things such as cNames being set correctly, domains are correctly installed everywhere and the payment details are set.

Ideally, you should provide them with complete access to all of your registrar accounts so they can migrate everything to a single registrar. A set of business rules can then govern monetisation, renewals and sales. They should also be the first port of call for any legal issues.

It then becomes the management companies task to ensure nameservers and all of the other little details are all set correctly. In fact, by paying the management company a percentage of the revenue they are incentivised to ensure that everything is correctly looked after.

Now you’ve completely simplifying your management down to a single contract and one relationship. You can then focus on what you’re good at rather than all the detailed mess.

It’s a radical approach but outsourcing has been adopted by industry after industry as it makes economic sense. This is exactly what I do with my domains…..typically speaking, I give them very little thought as there is a team of people that work every day on my behalf.

The mathematics is pretty simple. Let’s imagine that you’re earning $100 per day and the management company charges you 5% for their management services then they are essentially earning $5 per day. Last time I checked, you couldn’t buy a McDonald’s happy meal for that in Australia. If you earn less than $5 per day then you should do the management yourself, if you can earn more doing something else than outsource is the solution for you.

Here’s the problem with outsourcing. Many people like to fiddle with their domains and look at them as if they were their “precious” out of Lord of the Rings. Each domain has a little story they can recount at the bar over drinks with friends. Their domains are really “precious” to them but what they don’t realise is that in many cases their running a nice hobby, not a business.

If you’re one of these individuals I really do apologise for raining on your parade but seriously, you need to be treating your domains as a business and start becoming economically rational. I’ll be upfront in saying that I’m more in love with my bank account than any of my domains.

Whatever you do, stop trying to mess around with complex spreadsheets as you manage your portfolio and focus on what you’re really good at…..maybe it’s buying, selling or even building a business on one of them?

1412 Hits
0 Comments

Part 11 - Portfolio Optimisation - Revenue Leakage

Part 11 - Portfolio Optimisation - Revenue Leakage

Revenue leakage mostly occurs when you think a particular setting for your domain(s) is turned on and it’s not. From experience, we have found that it’s not untypical to find that between 10-15% of the potential revenue generated for a portfolio is actually lost due to mismanagement.

So before you go and try to squeeze another few percentage out of your parking partner or broker can I suggest that you get your own house in order first. If you do this then I guarantee that you’ll discover a significant jump in revenue.

So what sort of problems can occur? The obvious one is whether the nameservers for your domains are still set to where you think they should be. I know that they are set but are they set correctly?

If you’re juggling multiple accounts at different monetisation solutions, then it doesn’t take long for a mess to be created and you have no idea what is set and why you set them. This is particularly true if you also have multiple registrars and have no idea which domains are actually at which registrar.

So out comes the spreadsheet with the mighty vlookup command and after spending a lot of time and effort (have you accounted for that btw) downloading lists of domains, correlating them with parking solutions you finally get around to checking the nameservers.

Now you have to find a program or service that allows you to do this on a regular basis. This wasn’t initially too hard until you discover that some of your more esoteric ccTLDs need to be setup in specific ways for them to be installed correctly….doh!

Finally, all of the data is in Excel and you begin cross referencing each of your domains to ensure they are where you think they should be. This is when you get a bit of a fright because domains you thought were pointing to one parking company are actually pointing to another.

Worse than that, there’s quite a number of domains pointed to your registrars parked page and earning money for them rather than you! Those thieves! You then remember that you were late with your renewal payment because of a friend’s wedding so the registrar actually wasn’t doing anything wrong by pointing the DNS to themselves.

Then you discover something really strange. Some of the domains that you knew you had added to your parking account are no longer there. This means someone else is earning money from the traffic! Now the parking companies are thieves! You then remember that you were interrupted by your wife for dinner just before you hit the submit button to add the domains to your account.

After looking a little more closely you know beyond a shadow of a doubt that a particular domain was absolutely added to your parking account. In fact, it was but you forgot to respond to the email about there being a conflict with another domain owner so the domain remained in their account.

A couple of months ago you read in a forum that a particular parking company seemed to be paying out more than others. In a flash you’d setup an account and added a heap of domains (luckily you’d remember to set the correct nameservers). You check the account, wondering why you haven’t been paid and discover you’d forgotten to setup the payment details and send in your tax forms.

So you’re staring at your spreadsheets and like the sun slowly sinking into the horizon three things float to the top of your consciousness. The mess in front of you is full of bad data and doing renewals is next too impossible – decision, renew everything just in case. The second is the problem is only going to get bigger the larger and more successful your domain portfolio becomes. The third issue you realise is this is going to be an ongoing battle and you’ll have to go through exactly the same cycle next month.

So much for having a nice passive income on the side from domains…..this is seeming like a bit of work. If you are really honest with yourself, you can probably relate to doing exactly what I depicted in the above scenario. Domaining takes work.

If you don’t believe me that revenue leakage is a big issue, then take a look at the charts below for a test conducted by a domain owner with a LOT of domains. I picked two out (there were many more) and changed the domain name (for obvious reasons) as they illustrate exactly why managing a portfolio is non-trivial.

Revenue Leakage

The red area in the chart highlights the fact that the nameservers for the domains were suddenly pointed elsewhere. The client had no idea why this happened and switched the domains back. There were some cases where the domains were moved away, switched back and then moved away again!

So the question then becomes…..what’s the solution? I’ll dig into what I do in the next article.

1517 Hits
0 Comments

Part 10 – Portfolio Management – Direct Expenses

Part 10 – Portfolio Management – Direct Expenses

Most domain investors are very familiar with the direct cost of domain renewals but from experience, I find that many are not as aware of many of the other costs associated with running their business. It’s very easy to get so enamoured with the thought of selling one of your domains for a million dollars that you forget that time is ticking by and costs are mounting up.

There are two types of costs for any domain investment business. Direct costs are those that include, domain renewals, accountants, lawyers AND your time. I want to particular highlight your time as it’s often the forgotten or neglected cost.

Many domain investors have another job that puts food on the table for their families and they end up running their business more like a hobby. It’s fun finding domain names and making a few bucks on the side either through traffic revenue or selling domains but the question that all of us needs to answer is whether we are running a business or enjoying a hobby.

Let me be very blunt here. If you value your time at zero, then you aren’t running a proper business at all. You need to be tracking the number of hours you spend managing your domain portfolio and attributing an hourly rate for your time. As well as being prudent it will help you work out if your time would be better spent in some other activity rather than on your portfolio.

I’ve written about this before but I’ll mention it again. It may be more cost effective to outsource all of your domain management to external experts so that you can focus on other projects. For example, developing a domain into a profitable business.

Strangely, the other cost I would like to highlight that is often ignored by portfolio owners is tax. I should state up front that I’m not across the tax laws in every jurisdiction and I would highly recommend you seek your own professional advice.

That being said, if you buy a domain name for $100 and sell it for $1000 then you have a capital gain of $900. Not so surprising, most governments want a piece of that windfall.

Some investors have done some fancy accounting with their portfolio by burying these types of gains in offshore tax havens. I don’t know about the rest of the world but the Australian government is really cracking down on this type of behaviour and throwing around words like “fines” and “jail time”. Both are never good to be on the receiving end of.

I personally believe in legally minimising my tax but I also do whatever I can to be squeaky clean. If I have the tax book thrown at me then I want to know that I’ve made an honest mistake rather than tried to dodge an obligation. As an aside, there’s something pleasant about sleeping soundly at night knowing that I’ve paid my dues.

A number of years ago I was chatting to a major domain investor in the industry and the subject of tax came up. They calmly informed me that they hadn’t put a tax return in for the past seven years. I must admit that I didn’t know what to say as I pay my tax every quarter. The conversation quickly moved onto another topic.

If you don’t pay your tax, then your business has now become a ticking time bomb that has the potential to bury you in the future. I remember receiving a call from a domainer that was desperate to sell a portfolio because the sheriff was about to repossess their goods due to them not paying tax….never a good position to be in.

I’ve used an account since my first business over 30 years ago (showing my age here). A good accountant and lawyer for that matter are worth their weight in gold while bad accountants/lawyers can cost you everything.

I’ve learned that when selecting an accountant there are three rules which I apply:

1.      They need to be prepared to understand my business
2.      They are part of a firm (just in case the individual leaves).
3.      They are absolutely ethical.

When dealing with accountants and lawyers always, always and I repeat always, share everything with them. The level of advice they provide can be greatly influenced by the information that you provide them. Don’t ever be embarrassed because you forgot to do something or potentially did a “questionable” deal…..these are people that are in your corner fighting for you. Tell them everything as it will be kept confidential.

In the next article I'm going to discuss what I do with my domains and renewals followed by many of the hidden costs in running a domain portfolio.

1908 Hits
0 Comments