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… 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?

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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.

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