Why Traffic Optimisation Provides Greater Revenue

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We recently had a new client that does a significant amount of domain traffic revenue come across to ParkLogic (I'm a co-founder) for a test. They were previously with a single parking solution and I thought it would be interesting to share with you the results as a case study in why domain traffic optimisation works.

Escrow.com

After 6 days the overall results a 20% uplift in revenue…..which is quite a good given the short time frame. It's still early days for the optimisation process to kick in and effectively route the low traffic domains to the highest paying monetisation solution.

When you begin to unpack the data a little further an even better outcome is just on the horizon. For instance, for all those domains that have exhibited at least the same traffic levels as the previous month’s baseline the uplift in revenue has been 39%.

If we hand back to the client, the bottom 10 worst performing domains out of nearly 4,000 in the test then the results completely change. Overall, the performance is a 41.2% revenue uplift with a 75% increase in revenue for domains that had at least the same traffic as the baseline. This is a HUGE result where the revenue line has nearly doubled!

I wouldn't be surprised if the revenue line continues to increase over the next 6 weeks as the optimisation process hones in on the best performing solution. From that point onwards, optimisation will continue every second of every day.

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The Big Issues in the Domain Industry – Part 4

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In this article I’ll be addressing the final domain business model, traffic monetisation. As well as being valuable to advertisers, domain traffic drives many of the opportunities received from potential domain buyers. Contrary to popular opinion, traffic is the lifeblood of the domain industry…..not domain sales.

Escrow.com

One of the keys to greater domain sales is to leverage your domain traffic. If you sell all your traffic domains, then expect there will be a commensurate drop in domain sales. In Part 1 of this series I discussed using your traffic for your own sales rather than providing it for free to the marketplaces and have it potentially result in another person’s sale.

Traffic monetisation is a way to generate additional funds to cover renewal costs and contribute to your profitability. Many people wrongly believe that traffic monetisation is dead. It’s not. I personally know of many people that earn thousands of dollars a day by focusing on building their domain traffic portfolios. For those of you that disagree….I’m happy to have a chat about purchasing your traffic domains.

The major difference between traffic monetisation and domain sales is traffic monetisation tends (not always) to generate less revenue per domain but that revenue comes in month after month. Domain sales tends to be very lumpy and unless you have a very large portfolio it’s difficult to achieve a consistent income – this also makes planning exceptionally difficult.

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Video - Traffic Monetisation

Video - Traffic Monetisation

This is the final video in the 10th Year of Blogging anniversary series and it covers the topic of Traffic Monetisation. In this video I give my thoughts on the domain monetisation industry, where it has come from and where it is going to in the future.

Escrow.com

One thing is clear, if you are doing the same thing now as you always have done then you are leaving money on the table. This is a must watch video if you have experienced a decline in your traffic revenue over the last few years.

Traffic monetisation has become more of an algorithmic process rather than managing your domains via a spreadsheet. I hope you enjoy my thoughts on traffic monetisation and feel free to ask as many questions as you would like.

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Part 2 - Understanding EPC

Part 2 - Understanding EPC

This is the second article in the series that unpacks Earnings Per Click (EPC). Click here if you wish to reach Part 1. The previous article covered the basics in how EPC is calculated while this one goes in depth into what actually lays at the heart of EPC.

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So now we have an approximation for the EPC and the formula will look like.

EPC = (Total Revenue Over a Period of Time)  /  (No. Clicks x Parking Company Filter)

Escrow.com

This is great but we have forgotten the other side of the whole equation. An Earnings Per Click for the domain owner is a Cost Per Click (CPC) for the advertiser. How much they will pay for each click will be dependent upon their business models and ultimately conversion rates.

If I’m an advertiser and I need 10 clicks at $1 each to make a sale and I make $20 for every sale, then I’m happily making money. But if the online auction for the traffic increases to $2 per click then my advertising is costing $20 and I’m making $0.

In a perfect world where everyone has the identical conversion rate, the advertiser with the lowest cost base will ultimately be able to outbid their competitors. It just so happens that we don’t live in a perfect world and many advertisers have widely varying margins that they can expend upon buying traffic.

Assuming economically rational advertisers (they aren’t always) we can then simplify what an advertiser is willing to pay for a click down to the following equation:

p=  Am  S  C

Where:

p= maximum price per click

Am = Advertiser gross margin on the goods/service being sold

S = total value of the sale

C = Conversion rate (0 to 100%)

What this formula suggests is that in market verticals with large margins the EPC should trend higher. We see this as domain investors know the “Sale Value” of a mortgage lead is much higher than a computer games lead, so the EPC for mortgage traffic is much more valuable. Remember we are talking about EPC rates and not revenue at this stage…..revenue will also depend upon the click through rate.

By adding the conversion rate into the equation, we can clearly see why Google wants conversions to be as high as possible. The higher the conversion rate, the higher an advertiser can bid for traffic. I read in a forum recently that Google doesn’t care about the conversion rate…..this formula debunks that theory and provides an economic rational why Google wants higher conversions.

Ideally for a domain investor we want high traffic domains in market verticals that have big margins and large sale prices. Sadly, these are few and far between…

So we now know what an advertiser is willing to pay for a click but what’s our percentage? If we were to simplify the whole advertising auction system, then the formula for revenue now looks like the scary one below.

EPC forumla

Where:

p= Price advertisers pay per click
f(p)= p x Advertising clicks
G= Google margin
Mg = Additional Google tier margin
T = Tag smart pricing
M= Monetisation company margin

What does this complicated equation actually mean? Once you get past the sigma notation (ie. Sum) you have a function which is essentially what an advertiser pays for a click multiplied by the number of clicks.

The (1 – G) is the Google margin and the “T” is some “smart pricing” factor that is applied to the tag that your particular account at a parking provider happens to be on. The (1 + Mg) is the increase in margin due to the Google tiers that a particular parking company may be on….this typically has a very small impact on the results. The (1 – M) is the margin taken by the parking provider. This will then become the numerator for the EPC equation.

The sigma or sum just means sum all of the revenue earned for all of the values of "p" for the function f(p). In other words, just add up all of the revenue. So let's move on.....

The denominator (ie. Number of clicks) is different to the advertising clicks. This is where it can get a little tricky. An advertiser may still pay for a click but it is still not registered as a click in a parking company interface due to their filters. By rights, the revenue should still flow through (fingers crossed) but the clicks may not.

The question domain investors should ask is what can they influence in the equation? Assuming Google has the targeting right (they don’t always) then there isn’t that much at a single parking provider. If you’re big enough you can squeeze parking company margins but other than that an individual domain owner typically neither has the scale nor the technology to take advantage of other optimisation solutions. Don’t worry…..there is light at the end of the tunnel.

A few things should be said…..given the volatility of the domain parking market the parking companies do not have any spare margin to hand around to domain owners. In other words, there isn’t some secret slush fund that any of them have. If this were the case, then it would come out and as soon as they paid out with the slush fund it would be soaked up as domain owners migrate their traffic across to them. It’s the market at work….

On a personal note, as one of the founders of ParkLogic I've found that getting underneath the mathematics really provides dividends for clients. Understanding the maths and coming to grips with the fact that its constantly changing ís one of the reasons why large domain investors utilise our service.

In the next article I will go through the opportunities and pitfalls that understanding EPC presents for domain investors.

Greenberg and Lieberman

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Part 1 - Understanding EPC

Part 1 - Understanding EPC

One of the most misunderstood metrics that is bandied around by domain owners is the term Earnings Per Click (EPC). Everyone assumes they understand what it is but very few people have come to grips with how it’s calculated. In this short series of articles, I will pull apart EPC and show how it’s calculated so you can be in the know.

I was inspired to dive into this topic largely because I read a thread on a forum recently and it was clear that there were a lot of misconceptions about EPC that needed to be cleaned up.

Escrow.com

I need to apologise for some of the maths in this series. The domain monetisation industry lives and dies by numbers and there's just no getting away from them. I should also say that domain parking is very much alive and well. The main reason for this is advertisers want our extremely valuable traffic.

So let's get too it! We need to define Earnings Per Click in terms of a mathematical formula….it’s initially not that complicated so don’t panic.

EPC = Revenue  /  No. of Clicks

This seems pretty obvious but we need to dig a little further into the definitions of both Revenue and Clicks.

When you look at your stats for a domain at a parking company you are seeing the AVERAGE revenue the domain makes across a period of time. The shortest period of time that can be viewed is one day but it’s still an average.

I’ve seen domainers complain continuously about the fact they seem to earn a large amount on one day and a small amount the next for a particular domain. There is a second factor that comes to play in this averaging process.

A typically parked page has up to ten advertisements being displayed and generally speaking the advertiser at the top paid more for their position than the advertiser at the bottom. For some market verticals the discrepancy can be really large with the top advertiser paying a large amount per click and the bottom advertiser paying pennies.

Everyone seems to assume the demand curve for a keyword is completely horizontal and yet this couldn’t be further from the truth. In some cases, there is a sharp drop off in the price willing to be paid by the advertisers for the domain traffic. An example price/demand curve could look like the one below.

Demand curve

The sharp drop off means the EPC paid would fluctuate greatly depending upon where a user clicked on the page. Typically speaking the higher EPC advertisements are placed at the top of the page and the lower paid advertisements further down the page…..but with Google’s move to psychographic targeting of users this isn’t always the case (and this complicates things immeasurably).

There is a different shaped curve for every market vertical and sub-vertical for that matter. This will greatly influence the dynamic nature of the EPC rates.

In the example above, a low traffic domain means fewer clicks on the page and the averaging would not be felt as much. This would create the wild fluctuations in the EPC rate that many domain investors currently experience.

For example, let’s imagine there was a single click on the page that paid out $10, this would mean the EPC was $10. Compare this to six clicks that paid $10, $10, $5, $5, $1 and $1 that would then have an average EPC of $5.33. In the first example if there was a click of $0.10 of then there is a large decline in the EPC but if there was a single click of $0.10 in the second example the EPC moves down only a little to $4.59. It’s a simplistic example but it shows averages at work.

Sliding epc rates

One of the many challenges that all parking companies must deal with is bot clicks or even worse, fraudulent clicks. These clicks should be stripped out otherwise advertisers would be paying for clicks that have no opportunity to generate revenue.

Because all parking providers apply different filters to their click traffic the “No. of Clicks” or denominator can vary greatly from one provider to another. This also means you can’t compare one provider’s EPC versus another provider.

So now we have an approximation for the EPC and the formula will look like.

EPC = (Total Revenue Over a Period of Time)  /  (No. Clicks x Parking Company Filter)

In the next article in this series I'm going to really dive into the mathematics that make up the EPC and prove why conversion is so important for all domain owners.

Greenberg and Lieberman

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