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The previous articles in this series can be read by clicking on the following links:
Part 1 - Domain Industry and Valuations
Part 2 - The domain bubble
Part 3 - What caused the domain bubble?
Part 4 - Domains and the sub-prime shock
Part 5 - Domain values and opportunities
Part 6 - The Pressures on PPC
Part 7 - domainers under the magnifying glass
Part 8 - Domain values increase
Part 9 - Domain valuation at point C
Item three in our list of pre-requisites for investors is what underpins investment growth and sustainability. It would be quite difficult in today's economic climate and fluctuating PPC rates for an investor invest in PPC based revenue with an expectation of an 8 year return on capital.
 For example, over the last couple of months many domain owners have experienced up to a 10% decline in PPC earnings. The challenge for many portfolio owners is that there are wild swings in PPC revenue as advertisers enter and exit the online advertising space.
These fluctuations are what keep me awake at night trying to work out new methods to not only maintain the revenue of customers but reduce the risk of PPC movements. The larger the portfolio of domains the greater the focus should be on revenue risk management.
How does an industry move as quickly as possible to point C for revenue based investors? The fastest way that I know of is that as an industry we need to establish a set of standards that underpin what the metrics actually mean.
For instance, no two parking companies can agree on what a unique visitor is let alone a click. I believe that this lack of standards is a contributing factor that scares large sums of capital away from the domain industry.
This same disparate situation existed prior to the Internet advertising industry establishing standards. In my time as the chairman of the Internet Advertising Taskforce in Australia we helped established a set of standards that are still in use today. Prior to this, advertisers didn't know what they were paying for and this resulted in them being hesitant about investing funds in the online advertising channel. Since the standards came into force funds have flooded the industry and its thrived like never before.
In a similar fashion there needs to be standards brought in for traffic domains. The current message being received by advertisers is that the domain channel is "dirty" and risky to advertise in - hence the opt-out for Google customers. Standards help send a positive message.
Remember that the greater the number and volume of advertisers in the domain channel then the greater the PPC revenue and therefore the higher the valuations. In particular if the valuations are consistent and measured against industry accepted standards.
For the last twenty four months I've been expounding the virtues of standards and transparency and so far the message has fallen on deaf ears. It is my firm belief that the faster that we introduce standards the quicker the domain industry will pull out of its recession. Hopefully after the recent loss in earnings experienced by everyone due to the global economic downturn the principle players will begin talking to achieve a positive outcome.
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