Blogs about the domain industry and the various players and companies within it.

ICANN 63 - Barcelona

Kevin, Lars and Michael showing off ICU

ICANN finished a few days ago and I've finally got the energy to write a few thoughts down about it. I must admit that it does help that I'm now on vacation in Provence, France....

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In terms of business, ICANN was gruelling. After stepping off the plane on the Saturday I literally had back-to-back meetings from early in the morning until late at night. For me, each day at ICANN is becoming much more like NamesCon with a continuous stream of excellent meetings followed by a quick sleep.

Of course, it’s always good to catch-up with friends. Many of the relationships go back more than a decade and it’s a privilege to know people of the calibre of many of them. I remarked that one of the great things about the domain industry is that not matter which city in the world I happen to be in there is always a person I can have dinner with.

One of the strange things about ICANN is that it’s almost completely unaware of the domain investment community or at the best views it with a bit of distain. What all of the registrars and registries need to understand is that domain investors underspin the entire eco-system…..that’s the drum that I beat over and over again anyway.

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Gambling on Domains

Are you gambling on domains?

I must admit that I’ve never really understood the business model underpinning domain sales. I know that in this article I may rain on your parade and for that I’m sorry….but please help me out in getting over some of my possibly faulty logic

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The state of the market for domain names is that it has fallen from a peak growth of 11.7% in 2015 to 1.2% in 2017. The 2015 peak was spurred on by two factors:
•    The Chinese domain boom
•    Greater release of new gTLDs

When you begin to drill down into the data it becomes even more interesting. For instance, .COM grew by 6.4% in 2015 and is growing by 2.8% in 2017. The legacy TLDs (eg. org, net etc) grew by 1.5% in 2015 and slipped backwards by -1.9%. The surprise was the ccTLDs (country codes). In 2015 they were growing by 14% while in 2017 they are beating .COM out with a growth rate of 3.9%. I must admit that I love ccTLDs and have made a lot of money from them over the years.

The sorry tale is the new TLDs. After exploding out of the blocks in 2015 with a growth of 196% they are now contracting by 14.6%. Many have stated that this is not surprising as speculators leave the market but when you consider that over 50% of the domains are parked then you’ve got to ask what’s actually happening. The simple answer is some of the extensions (eg. XYZ) are experiencing massive drops which is influencing the numbers overall…..so no panic here for the truly good extensions.

Ignoring the decline in the new TLDs the overall growth in the market is around 4.8% or approximately 9 million more domains from 2016 to 2017. This is an important number as it represents the demand side of the market and should dynamically influence the sale price of domains.

The other curve is a little frightening…..the supply curve. Since the new TLDs were released, the market has been swamped with a massive level of supply. This is not the early days of the Internet where there was .COM, the CC’s and a few others. We are now in an environment where the supply is so large that it MUST impact the sales price.

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mgilmour
I based this roughly on overall market share. Yes, many domains are sold privately but I think not as many as people would have yo... Read More
11 October 2018
mgilmour
Many thanks for the extensive comment! My understanding was the $150m was the revenue line to GoDaddy not the net revenue. Maybe I... Read More
11 October 2018
mgilmour
Thanks for the correction of .tk.....I forgot to take them into consideration. What is for sure is the domain market is mature and... Read More
11 October 2018
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Subprime Problems with Online Advertising

Will online advertising survive?

Back in 2008 the world experienced the impact of the subprime mortgage crisis. Greed, combined with a dose of stupidity put the global economy into a tailspin. The question I have been asking myself is whether the online advertising industry is heading for its own subprime shakeout.

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The global financial crisis was caused by blending toxic loans that would never be paid back with good loans that would. The thought of big commissions spurred Wall Street forward to meddle with the ratio of good performing to bad performing loans so they were weighted on the wrong side of the ledger.

Ratings agencies such as Moody’s and Standard and Poors would look at these loan blends and put a rating on them that represented the riskiness of the blended loan portfolio. The problem is the agencies were paid by the banks that were trying to sell them…..so guess what, all these toxic loan portfolios received the highest investment rating.

I know that I’ve over simplified the whole financial crisis but what happened next was incredibly predictable and now a part of history. People lost their jobs as a credit squeeze hit the financial markets and central bankers wondered how they were blindsided.

Let’s compare this to the online advertising industry.

Traffic can be bought at varying degrees of quality and blended together so that it’s just acceptable enough for advertisers to buy. In fact, the name of the game for many traffic sellers is to get an advertiser hooked on the “heroin” and then dilute the traffic quality with “talcum powder”. This way the sellers can maximise their returns.

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What's Going On At ICU?

Kevin Kopas and Lars Jensen from .ICU

In June I wrote an article on the new gTLD ICU and I believed that it would be successful not necessarily because of the extension but because two of the founders, Kevin Kopas and Lars Jensen. I thought it was time that I checked in on their efforts and to see if my belief in the both of them was warranted….

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For a start, I don’t think anyone has clocked up as many frequent flyer miles as either Kevin or Lars....and that's saying something coming from an Australian like me. In their efforts to promote ICU I think they’ve attended just about every conference imaginable around the world.

If you ever bump into them (and you will) then just ask them what time zone they were in last week. I wouldn’t be surprised if you receive a confused expression, followed by silence and then a reply of which one do you mean? I sometimes wonder whether ICU will be successful simply because of their brute force effort.

Putting aside all of the anecdotes, what are the numbers telling us? I hopped into ntldstats (great site btw) and checked out whether the dynamic duo have managed to get things moving forward. The first thing I noticed is that ICU has cracked the top 50 most popular extensions in just under 3 months….not a mean feat in itself.

ICU regsitrations

As can be seen from the chart there was clearly an initial surge in early registrations and then a constantly increasing number since June. In fact, you could say the graph is getting slightly steeper as time goes by. My guess is this is the result of more registrars taking on ICU and exposing it to a wider market.

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Defining Traffic Quality

In a number of past articles, I’ve spoken about the fact that traffic quality is entirely dependent upon the advertiser. If the traffic works for them then it’s high quality, otherwise it’s low. This has always seemed to make sense to me until I began digging a little further…..and now I think I could have been wrong...

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Over the last couple of years ParkLogic has been experimenting with how to best define traffic quality. We’ve tried quite a number of third party services that are used by advertisers and what we’ve found is there seems to be a lot of smoke and mirrors bundled with some hefty fees.

The problem is that many advertisers rely upon these services to determine whether traffic they are purchasing is of a high quality or not. It’s the very sophisticated e-commerce website that attributes a traffic source id to a click and then tracks it right through to a purchase.

For those advertisers that wave the flag of Google Analytics then think again. If you think about it, Google is essentially in conflict with itself by wanting search traffic to provide awesome results so that the advertiser will purchase more traffic.

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joezepy
Looking forward to seeing more about this. I think you are on to something that we all have known for years here but has been obs... Read More
25 August 2018
mgilmour
Thanks for that. I believe domain traffic is incredibly valuable and we have been tossing it towards large advertising networks as... Read More
25 August 2018
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