What Brexit Means For Domain Investors

What Brexit Means For Domain Investors

Well, the news is out! Britain has just exited the European Union and the global financial shockwaves are only rumbling through the markets. It’s only been hours since the announcement but what does this mean for Domain Investors?

For a start, the forex interest in the event has been so enormous that popular website XE.COM crashed. I spent the last ten minutes trying to get any sort of activity and finally gave up. My guess is that it’s experiencing the impact of a very real DDOS (Distributed Denial Of Service) attack from genuine requests rather than a large botnet.

Escrow.com

After flipping across to Yahoo Finance I was able to see that as of this article the Pound has dropped over 12.65% against the USD. Likewise, the Euro has fallen by 3.6% and this will mean a possible boom ride for European domain investors.

The majority of the online advertising market is still in the United States and so any advertising dollars earned will need to be converted to Euros or Pounds. If a UK based domainer earns $US1 they will effectively get an additional 12.65% free of charge.

What it will also mean is that European investors will baulk at the idea of buying US based domain assets as they will be paying more for them.

I must admit that I’m pretty happy with the Australian dollar crashing by nearly 4% against the USD and nearly 3% against the Euro. The majority of our expenses at ParkLogic are in AUD and so this means we have more to pay the bills.

What we don’t know as yet is whether these rapid movements in the forex markets are a precursor to something else. Is this just the rumblings before the major quake? Remember, the majority of the European countries are so debt leaden that a decline in both the Euro and Pound is going to place a lot of pressure on their finances as debt payments come to term.

The currency interactions to really watch is the USD/CNY (US to China) exchange rate. It’s already increased by nearly 0.5% and with China’s massive debt this may be the straw the breaks the camel’s back. China is really caught in a difficult situation where they need a high currency to pay off their debt and a low currency to keep the economy flourishing with exports.

The CNY is also appreciating against the pound by 9.07% and this will mean the Chinese economy will be that much less competitive exporting to the UK and Europe. This will have a flow-on effect to the Australian commodity based economy that many economists are suggesting will cause the AUD to fall to around $US0.64.

All in all, I think we are in for a really interesting ride and US domainers are getting set up to be in a really strong position. With a strengthening USD bargains can be snapped up from around the world while living in a parity environment within the US. What is certain is we’re all going to be in for a really interesting time as the global financial markets rebalance on the news of Brexit. The question is whether the rest of the EU will begin to break apart…..time to get the popcorn out!

Sorry.....just edited the post and couldn't resist adding the following chart for the movement of the gold price over the last few hours. You'd think that something was happening in the global financial markets wouldn't you!

Gold price

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The Hidden Value of Optimisation

The Hidden Value of Optimisation

Many domain portfolio owners get so focused on their parking statistics that they forget about other factors that impact the overall performance of their portfolio. In this article I would like to unpack the effect the Euro/US exchange rate has had on a portfolio and to illustrate that all is not as it seems.

Escrow.com

I was recently looking into the performance of a particular portfolio that does a little over $20,000 per month in revenue. Given the size, I was confident that it was statistically significant for my analysis.

What I was investigating was the RPM (Revenue Per Thousand Visitors) trend so that I could try and understand what is going on with the overall performance. The reason why I was interested in the RPM is because the measurement effectively removes the impact of any fluctuations in traffic.

Since Sept 2014 the RPM for the account had dropped 6.5% from 13.85 to 13.00. Many portfolio owners have experienced some downturn across this period of time but I thought that further investigation was warranted. It just so happened that the portfolio had a large amount of European traffic and this got me thinking.

It wasn’t long before I had the below graph of the Euro/US exchange rate for the same period of time. The Euro had effectively depreciated by around 20% and this is what had contributed to the adverse results.

USD to Euro

 

There was some good news in the all of this analysis. Even though the Euro/US exchange rate had dropped by 20% the overall impact on the client’s portfolio was only 6.5%. The reason for this is that as the Euro dropped versus the $US the ParkLogic systems automatically migrated the traffic to higher paying European monetisation providers. As the client was being paid in Euros this effectively meant they were being paid more.

Any traffic that was being highly paid by US companies remained with them as long as they were paying more than the impact of the exchange devaluation.

I know that this all sounds a little complicated but it clearly illustrates why systems like the one developed by ParkLogic are so effective in reducing external factors that impact the revenue line. We've found that if you leave all of your traffic with a single provider for longer than about a week, then you will be affected by things such as the exchange rate.

If you leave all of your traffic with one monetisation company and there is a crash in the exchange rate, then you will be in for a rough ride. On the other hand, think of a service like ParkLogic’s as being like a “stop loss”. If things go bad, then the traffic is automatically moved for your benefit.

Full disclosure dictates that I declare that I’m one of the founders of ParkLogic. It’s not often that I openly discuss some of the hidden benefits like the one above we provide our clients. It just so happens that the exchange example is a clear case of why traffic optimisation really does work.

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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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