Starting a new job, project or business can be one of the most exciting and most stressful times in your life. It just so happens that this evening I’m about to do exactly that….I’ve decided to take on a new job as a bouncer.

For those of you that have met me, you will undoubtedly have great concerns about by intended new vocation. My physique is not particularly suited for the job as my fingers are more used to typing on a keyboard than rough handling a few delinquents out the door. But, I know I can rise to the challenge!

At some stage in most men’s life, circumstances thrust you into making difficult decisions and whether you rise to the challenge or collapse under the burden is up to your attitude. Tonight, I intend to be triumphant in my ability to become the best bouncer that has walked this planet….so watch out!

I know this is my first night on the job but I seemed to pass the job interview pretty well….even though I'm a bit stressed knowing the success or failure of the event largely rests on my shoulders. I’ve been told that imagining various scenarios can help alleviate my stress, so in an effort to prepare myself I’m practicing my witty bouncer comeback lines. I'd be interested in your feedback...

Partier: “So why are you throwing me out?”

Me: “Because your domains really suck and you have fraudulent traffic! That’s why!”

Or how about…

Partier: “Who the hell do you think you are?”

Me: (with Dirty Harry’s voice – of course): “I bet you’re wondering just how much traffic I have left? Can I really unleash a torrent of hell down upon your website? Well, feeling lucky punk?”

 Or….and now I’m getting way ahead of myself.

Partier (Bill Paxton whining Aliens voice): “Party’s over man, party’s over.”

Me: “It is for you. I just caught you attempting a domain hijacking. You’re outta here!”

So what do you think? Do I need to improve some of them? Please provide me with any suggestions to help me through my first bouncing job……as time marches forward I’m starting to feel a little nervous.

BTW, I should also mention that tonight is my daughter’s eighteenth birthday party and me (ie. Dad) is the bouncer of choice. So it’s with great relief that it looks like my new job is more of a contract appointment that will be finishing around 1am. Who knows, if I’m any good I may launch another business……I just need to buy the domain for that!

Have a great weekend and thankfully, I'll see you at NamesCon!

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)

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=  A_m  S  C

Where:

p= maximum price per click

A_m = 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.

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.

When I attended the recent Domain Conference in Florida I had a few copies of my science fiction book, Battleframe, to hand out as giveaways. It provoked a lot of discussion about scifi and one of the members of the Godaddy team ended up telling me about a book called “Read Player One”.

By the time I’d finally returned to Australia I’d completely forgotten the conversation until I received an Amazon delivery with a copy of the book inside. For a start the cover intrigued me, it had a picture of a young man climbing a stack of caravans……so I thought I’d give the book a shot and started reading.

What surprised me was the fact that the central theme running the whole way through “Ready Player One” was everything about the eighties. Computers, board games, computer games and music were all fodder for creating elaborate puzzle clues that the protagonist had to solve.

To be quite honest with you I cared less about the plot (which was a little simplistic) and more for the fact that it was a personal journey through time. Trash 80 computers with 16K or RAM, cassette loaders and Atari 2600 game consoles were carefully weaved into the overall story. I loved it!

My first computer was a Trash 80 clone and it sites under the stair in its box to this day! My second computer was a Commodore 64 and the games the characters played were straight from my childhood. Including Joust, Zaxxon, Defender (I loved that game) and the D&D (Dungeons and Dragons for the uninitiated) module “Tomb of Horrors”. I’d played and loved them all!

In fact, at one point I was desperately hoping the author would actually mention some of the games that I programmed…..but sadly no. The original “Lord of the Rings” and “Mugsy’s Revenge” weren’t mentioned. Maybe in book two JI can only hope!

Was it the best thing I’ve ever read? No. Was it just good mindless fun? Heck yeah! It managed to keep me up to the small hours of the morning which is all you can really ask from a book.

I would like to thank the entire Godaddy team for inspiring me to read “Ready Player One” and to the particular team member that sent me a copy of the book. I’ve already passed it onto my closest friend who is also one of the characters in Battleframe (Bosk).

Have a great weekend!

NamesCon founder, Richard Lau, provides an update on the preparations for NamesCon in 2017. Everything from his recent travels through to speakers and sponsors are covered.

Attend NamesCon 2017 at a fraction of the final ticket price of $999. Register now to save big with our "AlwaysThankful" $399 promotion which ends November 16.  And in respect of Veteran's Day on November 11th, any ticket purchased on Nov 11th will result in a $200 donation by NamesCon to Veterans Village in Las Vegas. (http://veteransvillagelasvegas.org)

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.

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.

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.

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.