The formula outlined in the previous two articles on EPC looks a little scary but whether we like it or not it is THE formula upon which a huge amount of the domain investor community swings. Understanding how it can impact your business actually isn’t rocket science but requires a little intuition. Here is the EPC formula in its entirety.

The formula now incorporates the advertisement clicks and also the Monetisation company filter in the denominator. What it does clearly show is the closer you can get to an advertiser the higher the payouts.....no surprises there! The goal is to effectively eliminate many of the margins on the top line and potentially remove one of the multipliers in the denominator.

There are two problems with managing direct advertising relationships:

1.      There’s a large hidden downside cost associated with the relationship management.

2.      Most domain owners don’t have the scale to attract the interest of the serious advertisers.

The one great thing about domain parking is that it’s scalable without scaling the direct cost base associated with matching the advertisers. The question is whether there is enough free margin available to offset the costs.

The rise of zero-click solutions is an attempt at getting closer to the advertiser in a unique manner. For those of you that are unaware, zero-click is where domain traffic is routed directly through to an advertiser’s web page and does not require a click. Behind the scenes there is a real-time auction process to determine whether the zero-click advertiser will pay more than a parking solution for the traffic….if they do, then they get the traffic.

Many of the zero click companies have moved away from working directly with domain owners because the domain owners do not have enough traffic to warrant working with them. The cost of doing business is just too high…..therefore domain owners are faced with working with traffic aggregators.

What needs to be appreciated is that as soon as you add zero click to the mix then you are effectively introducing yet another EPC. Remember that EPC is a measurement across a period of time (typically 1 day) while zero-click is an offer at a point in time. In terms of the stock market, this is comparing an average price versus a spot price….the two don’t mix.

Let’s take a look at an example that will hopefully provide further insight into the challenges of zero-click. Remember the example of EPC we used in article two in this series? The EPC was made from six clicks each of $10, $10, $5, $5, $1 and $1. The final average EPC result for the day came to a value of $5.33. You don’t know the individual values that made up the $5.33 you ONLY know the $5.33.

Let’s imagine a zero-click solution offered $6 for the traffic? Since it’s more than $5.33 then it looks great! Wrong! Zero-click solutions are smart and only want the pristine traffic. They can often accept the traffic that you were previously getting paid $10 for and now pay you $6. Your average EPC for the day has now dropped to $4……which is lower than you received previously.

Correctly setting up a zero-click initially solution sounds trivial but it actually isn’t. There must be a dynamic swinging of the real-time auction process to ensure each piece of traffic receives its full value. This can get really complicated really quickly!

I hope this series of articles helps domain investors in their understanding of one of the very much taken for granted metrics that are bandied around. EPC isn’t as simple as can initially be thought about and yet coming to grips with its intricacies can pay significant dividends. If you have any questions then please don’t hesitate to leave a comment below.

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!

So you’ve just been to The Domain Conference in Fort Lauderdale and a monetisation company convinces you that you should run a test with them. Is there any real point and what is the best way to do this?

If you’ve ever moved your domains between parking companies by changing the nameservers then you will very quickly realise that there are so many variables to consider that the test becomes meaningless. For example, by routing the traffic at different periods of time, traffic volumes and domain market verticals all contribute to distorting the results.

In addition, if you move all of your domains across to the new company then from the previous article in this series we now know the best case scenario is they will win 35% of the time. Remember this number is for a properly optimised domain portfolio. If they win more than that then it’s only because your portfolio has not been looked after.

All monetisation companies know that they will perform well on some domains and not so well on others. Their goal is to hope and pray that overall the total amount they pay you will be more than your current parking solution.

From the domain investors perspective this is a really silly way of looking at things. What you actually want is to leave all the domains that win with the new company with them and automatically move all the domains that do worse away. This then maximises your earnings.

The ideal solution would be to keep all of your domains where they are and then send a percentage of the traffic to the new company for testing. This process allows you to accurately benchmark the new deal with a greatly diminished risk, compared to sending all of the traffic for your domains to the new company.

Earlier this year, one of ParkLogic’s customers had just returned from NamesCon and they were approached by a couple of the parking companies to run a test. Rather than move all of the domains away from ParkLogic they had a chat with me and we then routed a portion of their traffic to special accounts setup for them at the new companies.

They then were able to assess down to the cent on each domain whether the new deals were any good or not. In the end they moved everything back to their ParkLogic controlled accounts as they performed better than the specially setup ones. I should say that we were very happy to facilitate this process for our client as we regard it as one of the services we provide.

This structured process provides domain investors and any of their investors the confidence that everything that can be done is being done to maximise earnings. There’s no “grass is greener on the other side of the fence” as we absolutely know what the grass looks like and tastes.

Ultimately what you need to assess is your stomach for risk or in other words, how big a percentage is good enough? We typically find that forcing around 20% of the traffic for each domain over a couple of weeks (time depends upon traffic levels) gives a good enough sample. If the new company wins then you should move 100% of the traffic across to them…..and this is what we do. If a few weeks later they don’t perform as well then we automatically migrate the traffic back to the winning solution.

So after going through this process, what constitutes a win for the new company? You can’t use revenue as the traffic will have varied for the domain and distort the result. The only measurement that you can use is the normalised RPM.

Remember, we discussed this in a previous article. A normalised RPM involves measuring exactly how much raw unfiltered traffic we have sent for a particular domain to a particular parking company. We then measure get the revenue generated from that traffic. For a domain, mathematically this looks like:

(revenue at a parking company) / (total traffic sent to the parking company) x 1000

This then means that for every domain we will typically have the normalised RPM for every monetisation solution at any point in time…..yes, that’s what we do. In fact, we collect around three hundred different metrics for every domain every single day.

So when we were assessing for a client whether the new companies were performing better we we’re not looking at the revenue. We are looking at the normalised RPM because this metric tells us if the grass is actually green or brown. Given the process we also know the colour of the grass for every solution at any point in time.

So let’s imagine you’re not with ParkLogic and you don’t have any baseline normalised RPMs. For many clients we typically integrate their current monetisation account into the system. They change the nameservers to ParkLogic and we then route 100% of the traffic back to their existing provider.

By going through this process there won’t be a drop in revenue and it allows us to establish a baseline normalised RPM that we can measure any new solutions against. We then test a portion of the traffic elsewhere to see if it will perform better at other solutions. The whole time we are keeping an eye on the normalised RPM. It isn’t long before we see an uplift in the overall revenue.

This is the proper way to conduct a traffic test as it provides definitive performance data that is accurate. I hate to say it but any other methodology will largely be guesswork which is likely to end up with a suboptimal result.

I have a really simple question to ask you, “Do you really understand your numbers?” For years now many of us have been staring at traffic statistics produced by different parking companies but do we actually understand what they’re telling us?

In this article I’m going to take you through a high level view of an account on ParkLogic (please view this article as a case study) and some of the analysis that we conducted to understand what was going on with the portfolio. Any client identifiable information has been removed.

The portfolio has over 48,897 domains and has a baseline revenue of $303.33/day over a 30 day period. ParkLogic was producing a revenue line of $287.09/day for the last 7 days or $16.24 less than the baseline. Most people would immediately suggest that we have failed to improve the results……and they would be wrong.

This is where we need to get under the numbers…..

What we discovered was that the vast majority of the domains weren’t receiving the same levels of traffic to them. In fact, of the 48,897 in the test only 11,223 had the same level of traffic or greater compared to the baseline. The results can then be summarised in the following chart.

The values on the left are the daily earnings for the portfolio for both the baseline and the test period for each level of traffic. In other words, you can find out the performance of domains that had greater than 0% - 100% of the baseline traffic etc.

For example, at the 40% traffic level the baseline domains earned $230/day and ParkLogic $257 producing an uplift of $27/day. For those domains where ParkLogic received at least the same level of traffic as the baseline then the performance is $192 for ParkLogic versus $125 for the baseline. This is an uplift of $67/day, which isn’t a bad performance at all.

So let’s take a look at the second graph and begin to interpret what it is telling us. The blue line is the ParkLogic revenue less the baseline for the particular domains that are part of the traffic sample set. The red line is the percentage increase in revenue for each traffic level.

For example, for domains that had at least 60% of the traffic that the baseline received, ParkLogic provided an increase of $47/day in revenue or a 24% uplift. Where we received at least the same level of traffic as the baseline ParkLogic provided an additional $67 in revenue per day which equates to a 53% increase in overall revenue! Now, that’s what I call smashing the ball out of the ball park!

If we had left the analysis at the macro-level and just compared the portfolio numbers then the massive amount of gold wouldn’t have been discovered. This is why getting underneath your domain traffic statistics is so important. I see so many domain owners make bad decisions on their numbers simply because they don’t actually know what they are telling them.

This is sometimes due to a lack of analytical skills but more often than not it’s a lack of time to do the analysis. I would recommend that you put your Excel skills to work. Remember that each and every day that goes by you’re leaving money on the table that could just as easily be in your bank account.

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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. Michael is passionate about working with online entrepreneurs to help them navigate their new ventures around the many pitfalls that all businesses face.
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