Common Domainer Misconceptions

Common Domainer Misconceptions

One of the easist mistakes many domain investors make is paying too much attention to their average daily revenue and not really understanding what it really means. The average daily revenue is made up from all of the individual earnings of each domain in a portfolio…..which makes sense but underneath that statement is a lot of hidden meaning.

A couple of years ago I met with the CEO of a large domain portfolio and they were amazed when I began to unpack the data that made up their average figures. So let’s look at a number of the misconceptions that many people hold to around their average numbers.
 

The Law of Averages

It's best to look at an example to illustrate what I'm talking about. Let's imagine that you have two domains in a portfolio, A.com and B.com. The average earnings per day for A.com is $1 and B.com is $0.10. Obviously, the average daily earnings for the portfolio is $1 + 0.10 = $1.10 per day.

If you are able to increase the earnings of B.com by 50% (which is a lot) then the earnings become $1.15 per day....which is barely a blip on the radar for most portfolio owners. Now here's the interesting part. Most people have 10 times more type B domains compared to type A domains. This means the average daily earnings is actually $1 + 10 x $0.10 = $2 per day.

Escrow.com

If we increase the earnings of all type B domains by 50% then the results is $3 per day or 33% increase overall in earnings. This is a substantial uplift and is ACTUALLY ACHIEVABLE....all you need to do is really think about how your domains earn revenue. Here are three misconceptions that many domainers don't really think about.
 

Misconception One - Park All Of Your Domains At One Place

The problem with most domain owners is that they leave all of their domains with a single monetisation provider. This strategy can have a dramatic impact on your earnings.

After collecting data across the last 8 years at ParkLogic we've seen that no single parking/monetisation source wins more than 25% of the traffic at any point in time. This means taht you could be getting paid more for your traffic 75% of the time!

What's interesting is that this doesn't really depend that much upon your revenue shares etc. You could be getting paid 100% and the results are still much the same. The reason for this is that around 30% of the domains move every 3 months to a new higher paying solution. Finding out which 30% should move is part of our "secret sauce".

If you want to increase your revenue then do NOT place all of your traffic domains with a single source.
 

Misconception Two – Google Pays The Most

As much as parking companies endeavour to optimise traffic they largely have their hands tied behind their backs by Google. How is this? For a start, assuming that your domain is not blocked by Google (ie. it’s not a bad domain) then contractually the traffic for that domain MUST first be monetised by Google to the exclusion of all other monetisation solutions. This means that the domain traffic ONLY gets Google’s best price and this is not necessarily the top price that a domainer can receive for their traffic.

Never forget, that although Google is a key domainer partner they are obligated to first increase shareholder value and that improving your revenue comes in a distant second place. As can be seen from the below graph, for the past ten years Google has been driving down their Traffic Acquisition Cost (TAC). The domain traffic channel is a part of the TAC.

Google TAC

I recently conducted a test on a small domain portfolio that were being paid less than 1RPM by Google by routing the whole lot to tier 2 providers. The result was a 37% increase in revenue. This increase would never have been realised if I hadn’t conducted the test.

The next stage in the test is to continue to route the domains that were performing better on tier 2 and re-route the balance back to Google. Finally, the optimum answer is to then automate the process so that the traffic will always be paid the highest price by the entire market….and not just the Google market.

It’s clear that by continuously driving TAC down Google has now reached the point where tier 2 providers are clearly competitive. I don’t know any domainer that wouldn’t be happy with a 37% uplift in revenue! In a future article I want to really pull apart TAC and what it means for domainers.
 

Misconception Three - The Euro to $US Exchange Rate

What many domainers don’t take into account is that the Euros/$US exchange rate can play a very real part in the average performance of a portfolio.

For example, let’s imagine that we are comparing the performance of a portfolio 30th June 2015 against the same time in the previous year. During this time the exchange rate has decline from 1.37 $US per Euro to 1.12 $US per Euro. That’s a decline of 22% that impacts negatively the numbers of any earnings for US domainers earned in Europe. Conversely, European domainers are loving the decline in their currency as the majority of online advertising flows from the US and they get paid via the US/Euro exchange rate!

Exchange Rates

Let’s make this a little simpler to understand. Let’s image that in June 2014 a European domainer parked with Domain Sponsor (US company) and they earned $1. They would have received $1 /1.37 or 0.73 euros. Ignoring all other effects that same domainer would now earn $1 / 1.12 or 0.89 euros. This is a big change in earnings that is largely brought about by the currency fluctuations.

The massive decline in the euro has meant that European domainers are enjoying a free increase in their parking earnings courtesy of absolutely no one. So many of the German domainers really need to go and thank their southern Greek friends.

So when a baseline is taken from a previous point in time....one of the things that you may have to consider in determining the success or failure of a test is the exchange rate. You also need to think about where your traffic routes through to and whether you can take advantage of the local advertisers and exchange rates.

 

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Michael Gilmour has been in business for over 32 years and has both a BSC in Electronics and Computer Science and an MBA. He was the former vice-chairman of the Internet Industry Association in Australia and is in demand as a speaker at Internet conferences the world over. He has also recently published his first science fiction book, Battleframe.

Michael is passionate about working with online entrepreneurs to help them navigate their new ventures around the many pitfalls that all businesses face. Due to demands on his time, Michael may be contacted by clicking here for limited consulting assignments.

 

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