After publishing the article, “Getting Dirty in the Domain Data”, earlier this week I ended up having an interesting discussion with a domain investor. I thought that it would be worthwhile continuing to pull apart the data from the previous post to help many domain investors understand why optimising traffic across multiple monetisation solution is so beneficial.

I will be referring to the data from the previous article so you may wish to read it if you haven’t done so already.

Sampling by Changing the DNS

Many domain investors sample different parking providers by changing the DNS. This method is fraught with many problems that largely stem from comparing results from single sources across different periods of time. Some of the challenges are:

1.      What are you measuring?
Revenue is not a good measurement of success as there will be different levels of traffic at different points in time. Since parking companies count traffic different you can’t rely on the produced Revenue Per Thousand Visitors (RPM) numbers.

2.      Data Distortion
When testing different parking providers over different periods of time you can get massive distortions in the data from seasonality in both the domains and the time of year. In the example from the previous article the domain had massive results in May to July due to it being a travel related domain.

3.      Traffic Leakage
There is a propagation delay each time you change the DNS and this creates more traffic leakage and no new information. In some extreme cases where the TTL (Time To Live) for the domain is long the DNS may not update for months for some users.

The Cost of Information

Some investors believe in splitting traffic equally across multiple solutions and then at some point in time sending all the traffic to the monetisation company that pays the most. This is one of the worst ways to optimise domain traffic and here is the reason why.

There are a lot of strategies around sampling but they basically boil down the single question, “What did the information cost?” In other words, if I was earning one dollar with one company and then sampled another company and found they were paying 90 cents then the information cost me 10 cents.

Minimising these "information costs" is crucial to optimisation. From the example domain, A.COM, in the previous article if we sample the traffic equally across the different parking companies then the portfolio would have earned $1611 versus $2217 or 38% less overall (ignoring direct advertisers).

Every domain needs its own sample regime. At the most simplistic level domains with less traffic should be sampled less often compared to domains with high levels of traffic. In each case, what you are after is a statistically significant result that allows you to decide where to route the traffic. If you don’t have a statistically large enough sample, then you’re guessing.

Real-Time Decision Making

All traffic routing decisions need to be made on a real-time basis. Based upon the data, decisions need to be made literally milli-second by milli-second. I can only speak for my company, ParkLogic, as we use dynamically changing data from multiple inputs to alter not only the routing decisions of traffic but what is displayed on the page and ultimately which advertisers are engaged.

As an example, we track over 250 different metrics for every domain every day and process this data to alter how the traffic is routed. Layered over the top of this daily data we then can then incorporate external dynamic data such as geo-based weather.

Everything must lead to a decision....otherwise it's just intellectually interesting but pointless.

Winning Solutions Constantly Change

If you sample other solutions (however you decide to do it) and then lock that solution in for an extended period of time, then you will be losing. The data from the previous article clearly shows that even for a single domain the winning parking company changes constantly (see below table).

For example, if we routed ALL the traffic through to Voodoo (average winner) and applied Voodoo's payout rates each month then Voodoo would have paid out $436 for the ten-month period. The domain actually earned $4531 for the same period of time (including direct advertisers). The reason for this was a combination of an advertiser paying a lot for the traffic in May-Jul and other parking solutions beat Voodoo the majority of the time.

This doesn't mean Voodoo is bad....as they actually did win for a couple of months. Remember the data is summarised on a monthly basis and can only testify to the fact that the same behaviour exists at the daily and even changes milli-second by milli-second.

Benchmarking Results Must be Done Simultaneously

I mentioned this point briefly when discussing the problems with sampling via DNS but it is important to reiterate it. Testing new solutions must be conducted at the same point in time otherwise distortions in the results will occur and incorrect decisions made.

Let’s imagine I used the domain’s revenue results in June as the baseline data and compared this to any new parking company in September. I could erroneously conclude that the new company was hopeless! Remember that A.COM (in the previous article) is a travel domain and has extraordinary performance in June.

Understanding Data

I’m in a discussion right now with a customer where about one hundred of their domains just aren’t performing. I’m not worried about this customer leaving ParkLogic as we are both working through the data to understand why their performance is down.

Too many domain investors immediately bail on their existing partner and whip their domains out somewhere else in the vain hope they will perform better. This syndrome has a saying, “The grass is always greener on the other side of the fence.” In other words, you will always think somewhere else is better than where you are.

My advice is don’t do a knee jerk reaction and move your domains. Sit down and dig into the data and really understand what’s going on with the traffic. We are in an industry that is built upon data and if you wish to get abnormal returns then it’s vitally important that you get your arms around it or work with a partner that can help you do so.

I hope the few items I’ve raised here in this article will help give you a fresh perspective on your own domain portfolio. Over the years I’ve found that earning more from domain traffic is not always the solution that investors are after. What they want to know is they are maximising their returns and there is proof that this is being done.

Anyone can have a good or bad month but knowing that there are systems and experts in place that are monitoring and understanding the results is really where it’s at. This is particularly the case if you must report to investors or a board. Having the data to confidently know that everything that can be done is being done often alleviates the concerns of the most aggressive directors!

As many of you are aware, Sarah, my daughter, has over the years helped me on and off with Whizzbangsblog. In my recent travels I had a number of people ask me what she is doing now…so here it goes!

Over the last five months Sarah has been working as a specialist make-up artist for “The Body Shop” in their flagship store here in Australia. It’s really allowed her to hone her craft as a make-up artist and more recently showcase some of her work on social media (Instagram).

She’s been reading everything there is about how to grow a following on Instagram and then posting a new photo each day. It hasn’t taken her that long to gain close to one thousand followers….which from a standing start is pretty good going.

She now has her sights clearly set on her next target of ten thousand followers. Apparently at around this number you can begin to get some sponsorship onboard.

The reason why I’m writing this particular blog is I’m wanting to help Sarah grow her Instagram followers. To see her Instagram page just click here or the link at the bottom of the page. If you’re into Instagram, then any “likes”, a follow or even a repost would be awesome!

If you have any expertise in social media and growing a following then I'm sure Sarah would be all ears. She plans on attending NamesCon in January so don't be surprised if you are confronted by a really enthusiastic young lady that is focused on learning everything she can.

Yes, I know that I’m shamelessly promoting my daughter…..but that’s what Dad’s are for JSo do a guy a favour and help me out…..if you’re a father or a mother then you know exactly what it’s like to have a daughter you’re just so proud of.

CLICK HERE FOR SARAH'S INSTAGRAM PAGE.

I watched the recent debate between presidential hopefuls Hillary Clinton and Donald Trump. Since I live Australia, you may ask why? I wanted to see whether either of the two candidates really seemed to understand the economic knife edge the world is currently balanced upon. Sadly, I was disappointed in what both of them had to say.

Other than a number of sound-bites there was nothing on issues such as China’s burgeoning debt Crisis and the impact this will have on the global economy.

Back on the 11^th May 2016 the Financial times reported the Chinese Communist party’s flagship newspaper, the People’s Daily, published a front-page interview with an “authoritative figure” who warned that the country’s soaring debt levels could lead to “systemic financial risks”. This doesn't sound good....

On the 29^th August the Australian Financial Review reported that prominent investor, George Soros, as seeing an “Eerie resemblance between conditions in China now and those in the US leading up to the financial crisis in 2008.” Remember, Mr Soros was the man that broke the bank of England in one of his currency trades.

What’s concerning is that Chinese debt levels are around 282% of GDP and China still hasn’t taken the foot off the debt accelerator. For example, right now debt is growing at around 13% and the IMF is forecasting China’s growth to drop to a 25 year low of 6.6%. This roughly means that it takes $2 of debt to fund $1 of growth….clearly unsustainable.

Some people are sitting back and saying, “So what! It’s China, that’s not us.” This is a naïve perspective of a highly interconnected world. As the world’s second largest economy (after the US) if China screeches to a halt then it will impact everything and I mean everything.

So what does this mean for domain investors? You only have to reflect on the last twelve months to see the impact of debt on the domain market. In an effort to get their money out of China and into more flexible assets many Chinese investors raised margin loans against share positions. They then took these loans off market (you can’t do this in most markets) and bid up the prices on short letter/number domains with the ultimate goal of flipping the assets into US dollars.

Last year, I attended DomainFest.Asia and upon returning home my business partner and I sold every domain we could get our hands on at top dollar rates. This year I attended the same conference and I can now buy the domains I sold last year for around 35% of the price I received for them.

So what happened? Debt combined with key market makers is what happened. This created a rapid downward spiral to the present valuations….it will be interesting to see what will happen to the price of all of the Chinese held domains in the event of a Chinese economic meltdown.

I remember writing about the crazy inflationary domain prices post the New York TRAFFIC conference. At the time key market makers pushed up prices and debt first entered the domain space (eg. companies like Domain Capital). This easy access to debt fuelled the price boom in much the same manner as the one Chinese investors just experienced.

So what else am I concerned about? Since the Global Financial Crisis of 2008 I’ve been keeping a close eye on the world’s major central banks as they tried to stimulate their way into recovery. This was attempted through combinations of lowering of interest rates, government spending (fuelled by debt) and quantitative easing (ie. Print lots of money).

Despite the massive injections of stimulus nothing has really worked. As can be seen from the chart below the global growth is still at a lackluster rate of 2.4%. In the case of Japan, the central bank has recently issued negative interest rates. This means it costs you money to keep your savings in a bank…..sounds crazy but true.

The main goal of dropping interest rates is to devalue the local currency by making it less attractive to foreign currency traders. Put really simply, if you can borrow money in the US at 2% and get 3% for depositing it in banks in Australia you can effectively make 1% for doing absolutely nothing. This effectively makes the $AU more in demand and increases the value of the $AU versus the $US.

So when the reserve bank in Australia lowers interest rates the margin gap between the borrowed and deposited money shrinks and this increases the risk. The $AU receives less demand and it sinks in value against the $US. This will ultimately mean that Australian goods and services are cheaper if paid with $US….which in turn stimulates the Australian economy. Sounds great in theory but there’s a problem.

In the case of the Global Financial crisis all the central banks simultaneous dropped interest rates/printed money. This has meant the competitive gap between nations didn’t materialise and central banks ended up scratching their heads while they played a global game of chicken with each other…..who will drop first?

Here’s what I’m concerned about, when central banks approach zero interest rates (or below) where do they go from there? All of their “gun-powder” has been used and we’re now rapidly approaching the 7-8 year economic cycle.

For years, economists have talked about a 7-8 year cycle as being like the heartbeat of the global economy. Guess what, back in 2008 was when President Obama first took office and literally weeks later he faced the sub-prime mortgage fiasco that caused the global economy to nose dive.

So now, after an interminably long campaign, we have Trump and Clinton coming up for election. If we imagine the two candidates as the captains on the economic titanic, as far as I can work out, Hillary is saying, “steady as she goes” while Trump is saying crazy things that amount to, “we need to instantly build a submarine.”

Let’s face it, both candidates are more focused on themselves then acknowledging the global problems that the US is caught up in. Neither is actually espousing a concrete plan with some sense of vision. I’ll be interested in viewing the next round of debates to see if there is any light at the end of the dark tunnel. It's sad to say but I think everything is down to how we all cross our fingers and hope something good will happen.

What the UK Brexit debacle has proven is a lack of decisive leadership around complex global issues leads to disaster. We elect leaders to lead and not to hand back their leadership in a referendum so they can say, “The disaster wasn’t my doing but the people’s”.

My hope is that once elected, either Clinton or Trump will rise to an unseen level of leadership that will inspire the entire US nation rather than foster the division that seems to be prevelant.

There are a lot more economic indicators than I’ve mentioned in this article that are pointing to troubling times ahead. So as a domain investor, what am I doing? Two words, gold and cash.

I could be wrong with all of my doom and gloom but there’s one thing I’ve learned over the years…..I’ve never regretted having excess cash. Cash provides the flexibility to move quickly and seize opportunities. If I’m right and in the first half of 2017 there is a financial meltdown, then there will be bargains aplenty for a person with cash.

I remember after the 2008 crash I picked up heavily discounted domain portfolios as people struggled to pay crazy high mortgages and tax bills. I’ve been enjoying the proceeds of these portfolios ever since. This time I think that I will be also looking at the more traditional markets and once again, domain data will help me pick the right companies to invest in. What I really want to keep an eye on is the Chinese domain market…..will it fall further or are there other opportunities that will play out in a downturn?

Just an aside, a recent report by management consulting firm McKinsey and Co. showed that Israel was one of the few countries in the world that was rapidly retiring debt. There’s one thing I know about the Jewish community, they’re generally pretty savvy when it comes to money.

So reduce debt, get cashed up and hang on for the ride….hopefully the cycle will pan out just fine but if it doesn’t, then make sure you’re ready.

I find that many people complicate running their businesses enormously. When you really think about it, it’s actually pretty easy to run a successful business. The revenue needs to be consistently more than the expenses…..seems obvious but given the fact that around eighty percent of businesses fail in the first two years it’s clear that the majority of people get on the wrong side of this equation.

The key word in the equation is “consistently”. Bringing consistency to your business revenue line provides you with an ability to plan versus one that is of a boom bust nature. One of the difficulties that many domain investors have is they have the elusive carrot of selling a $20K domain name tomorrow always in front of them while they starve now. There is no consistency to their revenue.

How can you get consistency to your revenue? One of the things that many customers like is consistency in product they are about to purchase. In fact, the whole essence of branding is all about consistency.

Whether you like them or not McDonald’s restaurants have done an incredible job to bring consistency to their product line the world over. I can go to a McDonald’s in Tokyo or New York or London, order a Big Mac and they’ll all be the same. It’s to the extent that financial analysts often quote the “Big Mac” index as a way of measuring the true buying power of a currency.

When I was away this past week my wife and I went to a restaurant and the food was terrible. It was so bad that Roselyn decided to write a review using an app on her phone. She’s never done this before so it was a bit of a new experience for her.

After writing the negative review she then looked back at what other people had written…..they were all terrible! So before going to any restaurant we are now checking what other people have written and to see if there is a negative or positive consistency to the comments.

Another way to bring a level of consistency to your revenue line is to examine your price. For example, is it better to sell ten domains at $1,000 each or one domain at $10,000? The answer to this question really depends on things such as your stock levels, need for cash, opportunity cost and appetite for risk.

Generally speaking I personally would much rather sell ten domains at $1,000 each rather one domain at $10,000. The reason is the levels of risk. If I lose one sale at $1,000 it doesn’t impact the consistency of my revenue line nearly as much as losing a single sale of $10,000.

So once you have the right price and right product with people buying all you have to do then is scale. If you are selling hamburgers this will mean you need to refine your processes of making them to minimise and control the cost side of the business. In the case of domains, how can you get your domain list in front of as many prospective buyers as possible for the least amount of effort.

There’s the obvious solutions of ensuring your domains are in all of the marketplaces but there are the less than obvious options as well. Such as, build a page with all of your domains categorised and priced. Have the for sale link traffic from parked pages point to your custom page to increase the chance of selling your domains versus someone else’s.

If you get the maths right, then you should end up with a sales revenue per thousand visitors number. All you then need to do is get the right visitors to help increase your sales potential. A little experimentation with some advertising may be in order…..but whatever you do keep track of your expenses.

If you have a consistent revenue line and a consistent expense line that is less than the revenue, then you have no choice but to make profit. Profit then provides the opportunity for reinvesting into additional stock, better processes or experimenting with different sales channels (eg. Facebook advertising).

If you aren’t making any profit, then at some stage you will need to make some drastic decisions or someone else will make them for you.

One of the great things about the Internet is that it allows everyone to express and opinion on whatever topic they desire. One of the bad things about the Internet is it allows anyone to express an opinion on whatever they desire, regardless of whether they have any authority to do so.

I was debating whether I would write on this topic as it can be somewhat controversial as some people may view it as a censorship on free speech. I’m actually all for people being allowed to express themselves but as readers we need to be really careful about who’s advice we listen to and adopt in our businesses.

For example, the other day I was having a really “vigorous debate” in a forum about monetising domain traffic. The person I was debating was very outspoken and to be quite honest with you at times insulting and sarcastic. In the end I found out they did about thirty cents a day in traffic revenue. If you didn’t know this then you could be mistaken into thinking they were an authority on their topic and earning millions of dollars per year.

There’s a really good saying which goes somewhat like the following, “By their fruit you shall know them.” This means that you should look at what a person does and has achieved rather than just what they say. On the Internet anyone can speak but very few people can do.

The classic book, “The Richest Man In Babylon” puts it this way. Go to the jeweller to learn about jewellery and the baker to learn about baking bread but you will lose your shirt if you get advice about investing in domains from the brick layer.

Was the author of the book having a go at brick layers? Heck no! What he was saying was be really careful who’s advice you apply to your business. Seek out a somebody, not an anybody as you will save yourself a world of pain.

I’ve been involved directly in the domain industry for over 15 years and during that time I’ve seen people come and go. Many have been like meteors screaming, “Hey look at me!” only to burn up in their own self-importance and disappear. There are some that have stood the test of time and are achieving amazing things.

When I attend domain conferences I like getting alongside some of the really successful “doers” in our industry to get their thoughts on a wide range of topics. These people are often the quite ones that sit in the corner and generally mind their own business while they finalise deal after deal. These are the people that I absolutely love and cherish listening to. Many of them I call my friends.

Does this mean that we shouldn’t listen to new comers to the industry? Absolutely we should but look at their “fruit” before you decide to completely adopt their business idea.

If you are new to the domaining my suggestion would be to get alongside those investors that have survived and flourished in the ups and downs of the industry. Don’t be afraid to pay for good advice and be very discerning whom you listen to. Remember, we have two ears and one mouth. Act in the same ratio.