I don’t know why it’s taken me a little while to update some of my analysis but there has been a big reporting change by Google which got me a little excited. In the past Google only reported an overall aggregate Traffic Acquisition Cost (TAC) but now this has all changed.

Since Q1 2015 Google has broken out the numbers for the network members from the distribution partners. You may ask, what is the difference and where does the domain industry sit?

Distribution partners are people like Apple, who charge Google for real-estate on iPhones etc. Google has hidden the amount that companies like Apple take by publishing the amount of revenue as a percentage of the overall Google website revenues (an odd metric actually). This means it’s impossible to reverse engineer the financial relationship…..which actually makes commercial sense.

On the other hand, for the first time ever Google has released the TAC to network members and this is the segment that the domain industry sits within. According to the reports, Google is paying out between 68-70% of the advertising revenue to this channel.

This begs a really simple question, if Google is paying out this amount then why have many domain investors experienced drops in their revenue?

To answer this question, we need to appreciate that the domain channel is one small part of the overall Google Network. This means that although on average Google is paying out between 68-70% of the advertising revenue the domain channel may be getting more or less of this figure.

So it’s time to do a dive into the data. The first stop was to pull out the average Google normalised RPM (nRPM) figures for a VERY large domain portfolio for each Google reporting quarter. I then graphed the quarterly percentage change over time (see the blue line on the graph below) and I then compared this to the payout figures that Google released for the network (the yellow line).

What we can clearly see is that the two lines nearly mirror each other. When Google pays out more, then the normalised RPM increases and when it pays out less then it immediately drops. But the huge swings in nRPM don’t really make sense when you compare it to the small swings in the Google average payout…..unless there is something else going on.

The only reason this would occur is if there is an artificial gain control for the overall domain industry that is being triggered by Google. In fact, one of these exists and it’s called smart pricing. In other words, a small change in the overall Google payout results in a massive change in what the domain industry receives. I think this has less to do about quality and more to do about Google making its numbers.

So here’s the really fun part. Since we now have a percentage change in the nRPM and also the % paid out by Google for a quarter we can multiply these two figures together and get a pretty good read on what the industry is actually paid out as a percentage of the gross advertising revenue!

Now here's the catch. We also have to assume that the Domain Industry was initially paid in Q1 2015 about what the average for the whole Google Network. There could be some scaler at work here but I tend to doubt it.

The below graph shows that in the recent 2016 quarter the domain industry received 91.4% of what Google received from advertisers. In fact, we’ve been on an upward trend since Q2 2015.

I know that many of you will cite specific examples where you’ve seen advertisers paying $50 for a click and yet you only get pennies. These specific perturbations in the data will continue to occur because what I’m looking at is averages and trends.

So right now we should be living in the golden age of Google payouts so get ready for a sharp trend down.....unless there is some corporate reason why Google would keep the payout rates high.

Now here’s where it gets REALLY interesting. Armed with this data the domain industry knows a big chunk of the Google quarterly report BEFORE anyone else does. In fact, with a little more effort I wouldn’t be surprised if we could pull just about the whole report apart!

This really got me thinking about whether we as an industry actually sit on a gold mine of data that would allow us to predict the movements in the Google share price……now that would be interesting!

I should say that if you plan on using this data for investment purposes you should first of all get some professional advice.

I’ve been asked a lot of questions by readers on the topic of traffic optimisation and I thought that it would be worthwhile diving a little deeper into some of the metrics that underpin all our traffic monetisation earnings.

To fully understand click through rate (CTR) we need to take a look at the formula.

CTR = (total number of clicks) / (total views) x 100%

Both of the measurements used in the CTR formula are subject to various levels of filtering. For example, is the “total number of clicks” the actual number of clicks on advertisements or the number of clicks on advertisements within a specified time frame? Or is it actually the number of clicks within a specified time frame for a particular IP address? Or is it the number of clicks within a specified time frame for an IP Address/Cookie combination?

Different companies will count clicks differently and there isn’t really much we can do about this. I have unpacked views in previous articles but it basically boils down to:

Views = (Raw Traffic) x Factor

The factor is a wide range of filters that are applied to the raw traffic by monetisation sources to strip out everything except traffic that is actually monetisable. Since there is no industry standard definition for views this metric will vary greatly from one parking company to another. This does not mean that any of the parking companies are behaving in a fraudulent manner but it does mean they count things differently.

So given the fact that both metrics used in calculating the CTR are completely subjective is there any point in looking at the CTR? Let me say that comparing the CTR between companies is a lesson in futility but comparing the CTR over time for a domain within a single company is actually worthwhile.

The CTR is actually a measurement of user intent. If a domain has a low CTR then it invariably means the parked page has little relevance to the desires of the traffic visiting it. So from an optimisation perspective we want to match the traffic to the page results as accurately as possible. In many respects Google gets this pretty right but there are always cases where Google gets it completely wrong and keyword optimisation comes into play.

With the introduction of CAF (Custom Ad Frame) by Google a number of years ago it essentially means that Google now serves the parked pages. You only need to do a “view source” to see that this is the case. What Google did was mimic the various parking provider’s templates and then they serve the pages themselves. The CAF strategy was driven by Google trying to stamp out fraudulent traffic – and they largely succeeded.

What this also means that when you set a keyword Google largely views it as a serving suggestion. Setting a keyword does not guarantee that Google will use that particular keyword for your domain.

Many years ago some domainers quickly realised that by setting mortgage keywords for all of their domains they would get awesome earnings per click but really low CTR. The huge EPC rates more than offset the decline in CTR. This is one of the reasons why Google doesn’t completely allow you to set keywords anymore…..they want to provide a better user experience (ie. CTR).

Earnings per click (EPC) is exactly what is says, how much money do you make for each click.

EPC = (Total Revenue) / (Total Views)

This formula seems pretty obvious until you begin to dig into “Total Revenue”. The total revenue for a domain is influenced by many different factors, including:

• Google tags at the parking level to encourage parking companies to maintain quality
• Sub-tags where a group of accounts at a parking company will be evaluated on their quality
• DRID (Domain Registrant ID introduced by Google at CAF time) – are you a good player or not?
• Clawbacks (often known as advertising credits)
• Account adjustments

A lot of these different metrics are wrapped up in the phrase “smart pricing”. In other words, has your domain/account been smart-priced up or down? This will all contribute to influencing the EPC.

But at its core, what is EPC? EPC is the measurement of advertiser demand on the Google advertising exchange. It’s a position on the supply/demand curve where if there is less supply the EPC goes up or if there is less demand for the same volume of traffic the EPC rate goes down.

If you ever see an EPC rate that suddenly jumps up, then it’s typically the result of a marketing manager putting the decimal point in the incorrect spot for a bid. Don’t get too excited, just enjoy the increase and expect it to fall off as their budget is quickly consumed…..with any luck you won’t get a clawback!

What we should also appreciate is that advertisements higher on a parked page get paid more than those lower down the page. The spread in EPC rates down the page will really depend upon the number of advertisers bidding for the traffic (think of it like market depth with shares).

Don’t forget that EPC is implicitly a measurement across a period of time. When you look at your parking company stats the lowest level of data you can view is the EPC rate for a day. I’ve said this before but it’s important to recap…..what you are viewing is an average EPC rate. This is vital in understanding how to optimise domain traffic.

So ultimately what domain investors want is a high CTR (user intent) and a high EPC (advertiser demand). The best way to achieve this is to examine the data, "suggest keywords" and then revisit the changes you've made......which is a LOT of work.

In my time as the vice-chairman of the Internet Industry Association of Australia I had the privilege of chairing the committee for setting the online advertising standards for our nation. There is one thing that I learned from that experience, fully understanding the definitions driving the metrics is mandatory if you wish to grow your online advertising based business.

Anyone that earns money from monetising their domain traffic should spend a considerable amount of their time not just looking at their numbers but interpreting what they mean. The only way you can do this is to understand the definitions. I hope this article has helped you out on your journey…..BTW, definitions can also change over time….so beware!

Over the years a number of people have asked me how to build a successful blog. I answered that it’s really quite simple. Write three to four articles a week for nine years and you’re guaranteed to achieve success. For some strange reason they normally go away with a downcast face at that answer.

Typically, instant success takes a lot of time, effort and discipline. All of these traits are things that most people really don’t want to hear about but needless to say are necessary for success. What they really want is the success without putting in the “hard yards”. I hate to say it but the world just doesn’t work like that.

Often to be successful it requires ninety-nine percent perspiration and one percent inspiration. I recently watched the movie the Social Network again for about the fiftieth time and two things really struck me about the way Jesse Eisenberg’s portrayal of Facebook founder, Mark Zuckerberg. He worked during breaks while being deposed and there was one scene where it was clear that he’d put everything into the launch of “The Facebook” and just wanted to sleep. Facebook just didn’t happen. It took a huge amount of work from some very smart people.

As a serial entrepreneur nothing drives me more crazy than a person who wants the success without the work. I was chatting privately on Namepros recently and it was so refreshing to speak with a domain owner that obviously worked incredibly hard to improve the performance of his portfolio. I'm confident that he will become more and more of a success story for the industry because he has the right work ethic.

The second thing that gets me really frustrated is evolutionary versus revolutionary improvement in any business. Over the years my company, ParkLogic, evolved one step at a time to provide better and better results for customers. It drives me completely crazy! Why? Evolutionary improvement takes results from 100% to 102% improvement and in the short-term it barely moves the needle. Over the long-term the improvements are significant but short-term they are really quite disheartening.

So now, we are on the verge of the launch of ParkLogic Next…..it’s a revolutionary improvement in everything that we do from the backend right through to the client interface. It’s taken a long time to write and we’ve still got a little way to go but I haven’t been as excited about the domain industry as I am now for a long time.

The reason for my excitement is that revolutions by their very nature are rare but they are often transformational. We’ve been working on Next for a couple of years and so you can assume it’s one of those “instant” stories. What’s so good about the platform isn’t what’s in the front end (although that’s pretty darn good) but what is happening behind the scenes. More on Next another time....

If you’re wanting to achieve success in your own life then ask yourself whether you are really committed to it and willing to put the time in to match the inspirational idea you have? If you are then you’ll be a long way down the track to achieving your own goals for your domain business.  My advice though is when you’re successful……keep on looking for the revolutionary idea that may kill your business and launch something new…..better you sharpening the knives than someone else.

Have a great weekend!

The current series of articles has really provoked some interesting discussions with a number of domain investors. What I have noticed is the high level of emotion that surrounds the whole domain traffic and optimisation debate. Many people have leapt to conclusions rather than look at the data and try to understand what it is saying.

Let me say once again that domain monetisation is not dead. The reason for this is genuine domain traffic contains valuable leads for businesses and advertisers are more than willing to pay for those leads. The goal of optimising your domain traffic is to best match the right advertiser to the right piece of traffic at the right time.

Like any industry, the advertising buying market is very dynamic with wide ranging payout levels at different times during the year, day and even sometimes second. So when I talk about optimising domain name traffic we need to really be as close to real-time as possible. Given the volume of data, the only way to route traffic to the highest paying solution is via algorithmic switching. So is all of this work really worth it?

I recently published some numbers over at the NamePros forum and I thought that it would be worthwhile digging into them here. For full disclosure I should state the data is from my company ParkLogic and we use algorithmic switching of domain traffic.

The data is real and was used as a part of the optimisation process for a particular client. Results for new clients will vary depending upon the optimisation levels and the domains in question.

What the screen capture shows is if we saw at least 100% of the baseline traffic (ie. The same) then we provided a 184% uplift in revenue. At least 80% of the traffic we provided a 162% uplift and for the entire portfolio there was a 127% uplift versus the baseline. In other words, if we saw similar levels of traffic to the baseline data then we knocked the results out of the ball park.

The baseline data came from a portfolio that was currently being optimised across multiple monetisation solutions via Above.com. I have nothing against Above as ParkLogic provides an entirely different service compared to them.

Just for the record, there were some domains where the baseline outperformed our results. This could be for statistical variations across time etc. We would recommend to any client where the baseline outperformed ParkLogic to take those domains away from us and re-baseline them to ensure the results hold true. ParkLogic does NOT win for every domain ALL of the time (versus a baseline) but I can say that we DO send the traffic to the winning monetisation solutions at a particular point in time.

What the data clearly shows is when you apply a level of discipline to optimising a domain portfolio that we do then the improvement can be considerable. The problem is most people try to optimise their portfolio themselves and have convinced themselves that they are saving money in fees.

This is a false economy because the data clearly shows that any fee would be more than covered by the uplift. In addition, the fact that you now have all of your time available is a huge saving in itself!

I don’t normally toot my own horn but ParkLogic really knows its stuff. We’ve been optimising domain portfolios for nearly a decade and when someone comes along and says they’ve built their own optimisation system it’s hard not to roll my eyes. Over the years I’ve heard many approaches……everything from DNS round-robin through to an automated system that leaves traffic at one place for a few days and then moves it to another for testing. I hate to say it but all of them are sub-optimal.

As an example, let’s tackle something really simple, incorporating zero-click real-time bidding (RTB) solutions into the traffic stream. Essentially RTB platforms let you poll them for what they are willing to pay for a piece of traffic. So they may come back with 12 cents as an answer. If you look at the traffic for a domain you may have an earnings per click rate of 10 cents and immediately jump at the 12 cents…..that is actually a really silly thing to do.

What we need to understand is that the 10 cents that is being earned at parking companies is an average across a period of time (typically a day) while the 12 cents is at a point in time. In other words, the 10 cents could be made up of a 20 cent click, a 5 cent click and a 3 cent click which provides an average of 10 cents.

What you don’t want to have happen is the RTB networks take the 20 cent traffic and pay you 12 cents while leave the 5 and 3 cent traffic behind. This would effectively reduce the yield from the traffic. So after around 6 months of testing various methodologies we worked out a system for incorporating RTB networks in an effective manner.

I know this was a simple example but it does give a glimpse into some of the complexities around routing traffic to the highest paying solution. It also illustrates that if you get your maths wrong then you could lose your shirt!

My friend and the friend of many, Tony Lentino, passed away yesterday. I know that I speak on behalf of the entire domain industry to pass our sincerest condolences on to his wife Emily and their children during this difficult time.

I first met Tony while training for my pilot’s license at Moorabbin airport. He was an amazing man who loved life and accepted everyone just where they were. The one thing that really struck me about Tony was his exceptional generosity and this permeated every aspect of his life.

I remember flying together from Melbourne to the Gold Coast to attend TRAFFIC downunder. My wife Roselyn and I were in a little Piper Archer while Tony and five other domainers were flying his larger Saratoga. He loved his plane (AQM) and it was an absolute joy for him to take people for a fly.

He didn't ask for anything from those that traveled to the Gold Coast and back. He happily invited them to jump onboard and have an experience of a life-time.

In those years, Tony came across as a bit of a larrikin but he was also one of the smartest and most astute business people I’ve ever met. He was always expanding his knowledge, whether it was a passion like aviation or something technical from within the domain industry. He was one of those rare individuals that had an insatiable appetite to be curious.

After moving back to New Zealand we didn’t communicate as often but I’ll never forget the day that he dropped around with his wonderful wife, Emily. It was clear that he was completely smitten by her and had met the love of his life. Naturally, she was a tremendous positive influence on his life and really brought out Tony’s gentler side. It wasn’t long before they started a family and had two gorgeous girls.

During the last few years, Tony’s zest for life continued with the establishment of the Super Black car Racing team. His goal was to both “give it to” the Aussies across the ditch (in a good natured way) and provide opportunities for Kiwis behind the wheel of a super-car.

Today, when I reflected of my many times with Tony I know that it’s been a real privilege to have known him. He was an amazing man in so many respects and it gives me great comfort to know that we will meet again.

From Jothan Frakes on Tony's Life

I am absolutely slammed right now - busy working hard to create a very special DOMAINfest again with a very amazing team of people, and some sad news came across my desk today.  The world lost a star today to their long fight with Cancer.

I had to stop for a minute and write this up as a tribute.  I asked Michael to be kind enough to allow me a few words in on his post about Tony Lentino because of a shared experience the three of us had after the T.R.A.F.F.I.C. Down Under conference in Gold Coast back in 2008.  More on that a few paragraphs from now.

Cancer sucks – full stop.  Before I continue, I hope that people who share their passionate hate of cancer will take a moment and support Elliot Silver will join in on his fundraising race in support of the Dana-Faber foundation here:  http://profile.pmc.org/ES0223

Back to Tony.  I cannot really think of DOMAINfest without thinking of Tony Lentino and smiling, because there is a wonderful backstory around it that I’ll share.

DOMAINfest has had the likes of Kim Kardashian, Biz Stone, Steve Wozniak, the Stone Temple Pilots, and I’ve met Rick Springfield and John Travolta in and around the event.  But the person who has stood out to me more than anyone as I think fondly back on the stars that I have met along the way - one person that stood out to me across all of my years of DOMAINfest – it was one of the attendees at the first DOMAINfest Global, Tony Lentino.

The team at Oversee.net and I had put together a number of small regional DOMAINfest events in 2006, and we launched the DOMAINfest Global (DFG) in Hollywood in January of 2007.   Because it was the year 007 we held a faux casino night at DFG with a ‘Casino Royale’ theme, and there were models hired who were ‘bond girls’, and among them was Emily, Tony’s wife.  They met there at DFG.

I also met Tony there at DFG – he stood out to me because he had such a vibrant and enthusiastic presence as such a good natured person – and the fact that he came all the way from New Zealand for the event had really impressed me.  (Also, how much he expressed respectful and gentlemanly interest in Emily stood out.)

I had the chance to see Tony again in 2008 for DOMAINfest Global in Hollywood, and later in 2008 for the T.R.A.F.F.I.C. Down Under in Gold Coast Australia, where I had been sent to continue my live auction development work with DOMAINfest, and speak about new Top Level Domains.

Among the amazing people in the domain name industry, Tony was there, as was Michael Gilmour, and Tony invited me back to Melbourne to visit his offices.  To get to Melbourne, Tony and a friend flew with Kevin and Julie Daste and I in his 6 seater plane, and we flew tandem with Michael and his wife in their plane across parts of Australia I would not have likely had the chance to visit.  We flew through the weekend and stopped in Port McQuarrie, Mudgee, and Parks, Australia and enjoyed local food and hospitality, getting the chance to visit and all get to know one another.  Tony was an exceptional host and very experienced pilot and the trip is on the top of my lifetime lists of experiences. 

I did not see Tony again until a few years later when he and Emily came to Seattle and they let me know that they were getting married, and then at the 2012 Webfest Global where he and Emily introduced their first daughter to me and we had dinner with some long time friends in Santa Monica.

You can read more about Tony in the article on SpeedCafe, and Tony is remembered as the founder of Instra and the owner of the Super Black racing team in New Zealand – but to me, I will always remember him as a robust and spirited part of why I love doing conferences and why I am grateful we have such a fantastic industry of people.   The way he met Emily and how their love grew and thrived, and his wonderful daughters are all things I will smile and remember him for.