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This is the final in a four part series on where I discuss domain traffic quality. In the previous three parts we've investigated what is meant about quality when it comes to traffic. This installment I will endeavour to wrap everything up with "smart pricing", parking portfolio managment and optimisation.
The challenge for a parking company is to balance the benefits provided from increasing the "smart pricing" index due to "increased quality" versus the volume of clicks. This is best represented in a distribution curve like the one below.
A typical portfolio of domains will have an average earings per click (EPC) and number of clicks such as those in the yellow curve. The wider the curve the greater the less the quality of the traffic therefore the higher the quality the narrow the graph around the ultimate EPC domains in that portfolio.
Smart pricing moves the distribution left and right along the EPC line. The more targeted the traffic the more smart pricing migrates the distribution to the right, the less targeted the more it penalizes the portfolio.
When a parking company accepts a lot more traffic then the distribution increases in height and typically spreads wider (less quality). Smart pricing will then shift the distribution down the curve. The parking company may choose to increase the quality of its traffic by refusing low quality traffic but this becomes a real challenge.
The only way to determine what low quality on a mass scale is to assume that the click through rate (CTR) represents quality. The assumption is that the lower the CTR the lower the targeting, the worse the quality therefore G&Y slide the curve to the left, which is not good. On the other hand a higher CTR represents higher quality (more targeted) traffic therefore the curve slides to the right. The scary thing is that the curve may represent a whole parking company's portfolio!
What's important to understand is that a low CTR does not necessarily mean low quality traffic. It's a flawed assumption. For example, I may have a domain that has links selling "business jets" on it. It may have an extremely low CTR but the conversion may be outstanding.
The reason why CTR is used is that G&Y don't provide a smart priced index for each individual domain. This lack of transparency is one of the biggest problems for valuing domain traffic and one that domain owners need to put every ounce of pressure on opening up.
Some parking companies refuse what they deem as "bad" traffic because they are concerned about the smart pricing implications to their whole portfolio; this of course then limits the number of clicks on their network as they have to refuse traffic.
The ultimate calculation is whether the value of the area under the grey curve is greater than the value of the area of the yellow curve. Remember that it's not just the area of the curves as we are talking about the average EPC.
Here is an interesting hypothesis. Other than fraudulent traffic there is no such thing as bad traffic, only badly targeted traffic. You may have the best domain portfolio in the world but if the optimization is incorrect then you may have a low CTR which in turn will slide that portfolio down the smart pricing curve.
Spending the time and building systems to optimise domain traffic narrows the distribution curve, moves it to the right and also typically gets a shifted further right again due to a "smart pricing" shift. Not wanting to blow our own trumpet but this is exactly why ParkLogic does what it does.
Let's imagine that you've spent the last month working away at your portfolio better optimizing the domains. Your parking company loves you for two reasons, the first because your earning more money which means they are as well and the second is that the more people that optimize the greater the shift in the smart pricing for their whole portfolio which gets them increased revenue for ALL of their domains.
You've just finished the mammoth task and unbeknown to you but a sales person in the parking company just signs up a huge portfolio of domains which are not optimized at all. Since all of your domains are mixed in the Google feed as everyone else's then you're now about to enjoy a decrease in your revenue for your efforts as the whole portfolio is smart priced to the left. This is really not fair and is why we push to try and get on our own feed with each parking company.
I personally believe that domain parking companies need to outsource their optimization and stop putting everyone's revenue lines in the hands of the couple of "kids" that they employed for optimization last week. I've maintained this position even before ParkLogic was established. Domain optimization can have a huge impact on the bottom line of a parking company and of domain owners but it is a specialized skill.
This finishes the series on "Quality" (for now) and I hope that you've found it interesting reading. Please feel free to provide feedback.
Forum discussion topic: Quality Traffic
Wiki: ParkLogic
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