This article continues directly from Part 1 in the series "Critical Insights Into the Domain Industry"

Google’s response to the aggregation of traffic by parking companies was to instantly grant a number of additional domain feeds to new parking companies. Some of these feeds had a honeymoon clause that allowed them to have a competitive advantage versus the larger incumbents. Many domain investors flocked to these new companies as they were seen as their salvation to paying renewal fees. This instantly re-fragmented the marketplace.

Now that the market was split up again, Google instituted DRID’s (Domain Registrant ID) to reduce fraud (this was a good move IMHO) and CAF (Custom Ad Frame). CAF is where Google controls everything on the lander for a parked page.

Personally, I think that this overall strategy was a really clever part on Google. It allowed them to decrease PPC rates and completely control the entire domain channel without the threat of a wounded Yahoo stepping up to the plate. Some people get really upset by Google’s behaviour. What domain investors need to understand is that Google is obligated to behave in such a fashion on behalf of their shareholders.

In fact, if you look at the Google TAC (Traffic Acquisition Costs) graph over the last years you can see the TAC in a constant decline as Google buys traffic at cheaper and cheaper rates. The domain channel is but one part of the overall TAC number....sadly, this is not broken out as a separate number. It would appear that the TAC is now at the point where tier 2 players are a serious contender for the traffic. This has really made zero click a feasible option for domain traffic. The challenge for individual domain investors is to actually take advantage of this...

So let’s get back to the story. So who bought the domains being sold by investors and how did they buy them? Many of the buyers of the traffic domains did so with debt or investor backed money raised just before the financial crash. Post the GFC this became problematic as:

1.            Promised investor returns weren’t realised.
2.            Debt payments couldn’t be funded.

A number of funds that raised a lot of money found themselves in the awkward situation of dealing with boards that were screaming for results. Here’s what’s interesting. In the past it was good enough to buy a domain and get phenomenal returns from the traffic but now things were different. A different set of skills were required to extract every bit of value from the domain traffic.

A good way of thinking about the problem is like this. Previously you could bend down and pick up a nugget of gold while now you need to drill three miles deep and run a shaft two miles horizontally to find the seams of gold in the traffic. The gold is still there but it just takes more effort to get it out.

The individuals and companies that raised cash to acquire domains now needed a different set of skills to extract the value. For most companies the individuals have skills to find domains, do deals and do basic monetisation. Very few, to none of them had the skills necessary to extract every dollar out of the traffic.

The problem then became one of ego. For the years before the GFC many of the individuals that had established these domain funds had been lauded as geniuses. They were partying like there was no tomorrow and almost overnight they were completely out of their depth. Picking gold up off the ground is very different from driving shafts into the bedrock.

I remember being in a meeting with one such fund where my company, ParkLogic, had increased the revenue by 32% (versus a direct Google feed). The company refused to admit that this was possible and turned their back on the additional revenue. It turned out that there was massive political infighting and egos were being threatened because they didn’t have the skills to produce the same results. Lesson learned, it’s always easier to deny the facts then to admit you’re wrong.

These same portfolios are now being broken up into pieces as investors (and debtors) endeavour to get some of their money back. Domains that were purchased for 40+ months revenue are now being sold for 12-18 months.

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Michael Gilmour has been in business for over 32 years and has both a BSC in Electronics and Computer Science and an MBA. He was the former vice-chairman of the Internet Industry Association in Australia and is in demand as a speaker at Internet conferences the world over. He has also recently published his first science fiction book, Battleframe.

Michael is passionate about working with online entrepreneurs to help them navigate their new ventures around the many pitfalls that all businesses face. Due to demands on his time, Michael may be contacted by clicking here for limited consulting assignments.

There’s nothing like a reworked root canal to stop you dead in your tracks. This week, through the auspices of my dentist, my body decided to take control of my mind and laid me up in bed with waves of headaches. To say wave’s makes it sound like they were lapping on the shore….it would be better to describe them more as tsunamis.

There is a good side to all of this. As well as a lot of sleep (got to love those pain meds) it gave me time to reflect on a multitude of vitally important topics. Such as, why the education system will teach my children calculus but not how to manage money. The next step in improving the sales of my book. Why the rain against the window seemed incessantly loud.

In my delirium, I also contemplated why the dog in the first episode of “House of Cards” didn’t bite Kevin Spacey’s hand and give him rabies. How many jelly beans fit into the glass jar in the cupboard above my desk? Why is it that terrorists seem to keep on wanting to blow things up versus build something that lasts?

As you can see, my thinking was solving life’s big issues.

I’ve spoken and attended a lot of conferences over the years….and clocked up quite a few airline miles in the process! During this time I’ve seen so many people come and go, businesses launched only to vanish and domain investments completely mismanaged.

So why am I reflecting on these things? I was speaking with a client this morning and the conversation caused me to journey down memory lane and review a few of my old presentations that I’ve shared at conferences.

I had a bit of a laugh when I looked at a presentation that I did at TRAFFIC Vegas 2008. One of the slides predicted the recession and the collapse of domain valuations and PPC revenue. Guess what….it happened.

Am I a living genius? My wife would be the first to say, not at all! What I try and do is take in what is happening in the complete industry and then ask the reason “Why?” This is quickly followed up by, “So what does this mean?”

So let’s take a look at the state of the domain industry with these two questions in mind.

Why do many people think that domain parking is dead? Back when the revenue squeeze came on many domainers were left holding two types of domains, traffic and brandable domains. At the time brandable domains weren’t in fashion because there was a global recession. Despite this everyone believed that they knew their domains would be worth a fortune (wink, wink).

Many investors convinced themselves that PPC rates were declining and that soon all of their traffic domains would be worthless. So they sold them off at discount prices to help fund the registrations of the brandable domains.

You see, brandable domains are like a ticket in the lottery. You have to have a ticket if you will have any chance of winning….the only problem is that the domain lottery ticket has to be paid each year. When you don’t have the funds to finance registrations you have no choice but to look at selling the one thing that does have value now……that’s traffic domains.

As PPC rates decreased there was pressure to sell while you still could. Very few people thought about how to increase PPC rates and maintain their revenue lines. A herd mentality developed and traffic domains began flying out the door while at the same time domainers dropped more speculative domains.

I want to say upfront that although PPC rates did decrease they have not decreased as much as many domain investors have experienced. Here’s some data that I think you’ll find interesting. The most that ANY parking company wins is 25% of the traffic. This means that in the absolute best case scenario, if you left all of your domains with one parking provider then 75% of the time the domains can perform better elsewhere!

Some domain investors caught onto this and began manually moving their domains around to find the best monetisation solution. Here’s another stat that most people aren’t going to like. After nearly nine years of running what I believe is one of the most sophisticated optimisation system in the world I have found that around 33% of domains move providers every 3 months. The problem is that it’s a different set of solutions and a different set of domains!

So why did PPC rates decrease? It was really simple, because they could. Google is the dominant provider of PPC revenue to the entire domain channel and to maintain its position in the industry it logically did two things. To fully understand this we need to first understand the industry at the time.

Traffic had begun consolidating around several large hubs of monetisation providers, the largest two of which were Domain Sponsor and Sedo. The problem with a consolidating market is that the tail could end up wagging the “Google dog”.

While traffic was spread throughout the industry Google could play one player off against another. The problem became when Domain Sponsor raised a lot of capital via Oakhill Capital Partners and Sedo became part of United Internet and developed a domain sales revenue stream that was not dependent upon Google. Both these actions meant that the companies could now buy vast amounts of traffic and potentially break the Google exclusivity stranglehold.

The next article will continue the story of the domain industry and how Google responded to this threat.

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Michael Gilmour has been in business for over 32 years and has both a BSC in Electronics and Computer Science and an MBA. He was the former vice-chairman of the Internet Industry Association in Australia and is in demand as a speaker at Internet conferences the world over. He has also recently published his first science fiction book, Battleframe.

Michael is passionate about working with online entrepreneurs to help them navigate their new ventures around the many pitfalls that all businesses face. Due to demands on his time, Michael may be contacted by clicking here for limited consulting assignments.

So it’s been a few weeks since my last post about how I’m marketing my science fiction book, Battleframe. I’m using this experience as a case study for marketing without spending any money. Many of the lessons learned are directly applicable to any online business. So what’s been happening?

I had a bit of a road bump with Amazon where they had a bug in their system that effectively delisted my book and this resulted in zero sales for about five days. This wasn’t too good but after a brief email exchange they returned Battleframe back to the shelves for sale….thank goodness!

I’m now linked into a number of author communities and taking part in the various discussions. This is time consuming but quite a lot of fun. Whatever industry you are in I would highly recommend getting involved with people who are already working in it….you never know what could result.

So in the process of getting to know other authors I discovered that although they were great at writing many of them lacked marketing skills. Each of them was trying to sell their books in isolation and develop their own readership….this is REALLY hard work! So while I had some time off with the flu I put my brain into gear around how to solve this problem for my fellow authors.

The result is that I have now built SFFAuthors.com (science fiction and fantasy authors). The website allows authors to have their own social profile share what they are up to either via the built in blogging platform or pull in their own RSS feed. The activity stream then displays the latest articles from SFF authors. I’ve now integrated Twitter so that authors and readers can pull in their twitter feeds and post directly to Twitter from the website. There’s heaps in site and I plan on expanding it further.

So what’s my business goal? I’m a firm believer in, “What goes around comes around” and so the platform has been designed so that authors can effectively share with each other’s readers. This means that readers of Battleframe may buy another author’s book because that author posted some really interesting blogs/comments. The goal is that readers can really get to know authors and authors that don’t have very much technical expertise can now interact with their readers…all good. I’ve let a few people know about the website and the response has been really positive. I’m now encouraging science fiction and fantasy authors and readers to join the community.

So what lesson have I learned? Sometimes when you enter an industry for the first time you can end up viewing it in a very different manner from the incumbents. By applying your own perspective you may suddenly find yourself providing a service that you could never have imagined when you first embarked on your journey. For example, I had no idea that I would be setting up SFFAuthors.com when I started writing my book…..but here I am.

So what’s happened to my sales? It’s a rare day that I don’t sell a number of books….so something must be going right. The biggest issue that I had to overcome was getting reviews on Amazon (real ones, not fake bought ones) as reviews have a huge influence on whether a person will by a book or not. As of writing this blog I now have five reviews (4 five star and 1 three star) and some pretty respectable feedback.

To take my book to the next level I plan on giving away some ebooks and inviting some other authors to do likewise. I will very likely make it part of a campaign where only members of SFFAuthors.com can win a free book…..so hint, hint…..sign-up and win :-)

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Michael Gilmour has been in business for over 32 years and has both a BSC in Electronics and Computer Science and an MBA. He was the former vice-chairman of the Internet Industry Association in Australia and is in demand as a speaker at Internet conferences the world over. He has also recently published his first science fiction book, Battleframe.

Michael is passionate about working with online entrepreneurs to help them navigate their new ventures around the many pitfalls that all businesses face. Due to demands on his time, Michael may be contacted by clicking here for limited consulting assignments.

Understanding performance often requires getting really deep into the numbers. The other day I said to a client, “We like to understand which domains we win and which domains we lose versus a baseline.” Let me take you through some high level data that gives a snapshot of what I’m talking about.

For a start the data I’m about to go through is actual numbers for a client but for obvious reasons any identifiable information has been removed. The data is for a particular domain portfolio where it would appear that our optimisation services were struggling.

The portfolio being tested has a baseline of around $95.59 per day and within the first week of being tested we underperformed by $12.37/day. Compared to what we usually experience this was a disappointment for ourselves and more particularly for the client. So what was going on?

Here is a snapshot of the performance data from 4 weeks, 3 weeks and the most recent week. All data has been normalised to reflecting the average daily for the period. There is the current revenue, baseline revenue and then Daily performance and the percentage difference.

The columns are in bands of traffic. From All domains to those doing more than 0%, 20%, 40% etc. up to greater than 100% of the traffic compared to the baseline.

As an example, four weeks ago for domains that we saw at least the same amount of traffic as the baseline we performed at 100% of the baseline….in other words, no uplift. Overall, we performed 87% of the baseline for ALL the domains…..not good.

Most domain investors would immediately throw up their arms in horror and bail on the test at this point…..but let’s take a look at what happened over time.

I’m going to jump right down to the latest series of data for the past week and compare this to the baseline. For domains where we saw at least as much traffic as the baseline we are now performing 15% better. In fact, ParkLogic performed better for domains that have at least 60% or more of the baseline traffic. The overall performance jumped from 87% of the baseline to 96% of the baseline in a few short weeks.

What this data really says is that if there is traffic we perform better…..if not, then we don’t. This kind of makes sense! All that we really needed was for time to go by and those domains with little traffic generate a click or two.

To see the change in performance over my data set I summed the % Difference rows. This is a crude way to find out overall what was happening each week. The summed percentage moved from 634% to 711% which is an overall increase of 12% and to date this is continuing.

This is a lot of interesting data but what does it really mean? The problem with the portfolio isn’t that we aren’t performing, it was that it was taking a bit longer than normal because the typical domain has such low traffic. Unless there is traffic we really can’t quickly do the optimisation to increase the result.

What’s important is that as time goes by the trend is continuing upwards as our algorithms and processes go to work on the portfolio. What was also hidden in the data was the fact that we are currently providing an additional $40/day in revenue over the baseline for a large portion of the domains. In fact, if we were to keep managing all the domains that we were winning on, handed back the domains that we weren’t to the baseline company (assuming is performed the same as it previously did) then the client would receive a net revenue increase of 42%! That is a HUGE number!

The overall current number of $3.71 down was actually hiding a HUGE windfall….the challenge is to work out how to get at it. We are continuing to monitor the results each day and in our meeting with the client we plan on working out the next steps to extracting the traffic value.

There are two parts to this analysis which are key. First of all, you need the ability to mobilise the data and secondly, an eye to interpret what the data is actually saying. I’m not meaning to blow my company’s horn but the ParkLogic team has spent many years developing processes and skills to do exactly these two things.

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Michael Gilmour has been in business for over 32 years and has both a BSC in Electronics and Computer Science and an MBA. He was the former vice-chairman of the Internet Industry Association in Australia and is in demand as a speaker at Internet conferences the world over. He has also recently published his first science fiction book, Battleframe.

Michael is passionate about working with online entrepreneurs to help them navigate their new ventures around the many pitfalls that all businesses face. Due to demands on his time, Michael may be contacted by clicking here for limited consulting assignments.