February 2009 - Issue #43

Howard Hoffman joins the newsletter this month for a the first installment of a regular column called "By the Numbers." Howard has a BS in Civil Engineering from MIT and a MS in Environmental Engineering from Stanford University.  He is a serious investor in domains. Based on his early experience as a PPC advertiser, he embraced the income side of PPC and was an early user of domain parking services.  Look for in-depth exploration of the domain monetization numbers in this and future issues.

DOMAINfest Global Raises the Bar

Bear with me.  I usually hate reading posts about conferences or trade shows that I didn't attend.  Over 600 people did attend DOMAINfest Global in Hollywood, California, making this the largest domain conference in some time.  Most of them left happy.  The panels were first rate, with speakers such as Danny Sullivan and Bruce Clay from the SEO world, Hal Bailey from Google, and Steve Wozniak (Woz); as well as the usual domainer-oriented panels.  There was lots of talk about new ways to monetize domains; especially focusing on development.  Most domain developers are focusing on one domain at a time, but there are platforms in the works that claim to do semi-development on a larger scale.  The jury is still out on whether this is a good idea.

Oversee.net, the parent company of DomainSponsor put on the show.  I was especially impressed with their inclusion of other parking and monetization companies.  There were 20 diverse exhibitors and over 30 total sponsors, and domain parking companies were well-represented with the likes of Sedo, NameDrive, and Parked all in attendance.  




Noticeably absent from this conference were the people from NameMedia, parent company of GoldKey, Active AudienceSmartName, BuyDomains and Afternic.  They canceled a planned IPO late last year and some domain industry insiders report that they are highly leveraged and in some financial hot water.  

By the Numbers - by Howard Hoffman

As most domain owners know, there has been a long-term trend of declining Revenue Per Click (RPC) from Google- and Yahoo-fed parking providers (DomainSponsor, Sedo, Fabulous, SmartName, TrafficZ, etc).  RPC is simply how much we get paid for each click-through to an advertisers website.  If all other things are held equal (Visitors and Click-Through Rate), then a 10% reduction in RPC will result in a 10% reduction in revenue.  For most of the services that we have tested and analyzed, the revenue peak occurred in January 2007.  Since that time, all portfolios that we monitor are down.  The average revenue reduction is around 45%, and most of that is attributable to declines in RPC.  There has also been some decline in Click-Through Rate (CTR).

First, lets consider CTR.  CTR reflects the interest of the web-surfer in spending there time to check out one of the ads on a parking page.  As pages have become more targeted and more attractive, we might expect a higher CTR.  More attractive may or may not increase CTR.  People at DomainSponsor, in particular, seem to be proud of ugly pages that have high CTR.  However, based on our experience, good looking graphics can give a web surfer a comfort level that they are at the right place.  However, this really depends upon a large number of factors.  Certainly, having relevant, targeted subpages and links will tend to increase CTR.  However, we believe that as more and more formerly blank domains resolve to parking pages, web surfers seem to be less interested in clicking thru.  So, this would explain a drop from around 22% CTR that we had one year ago to around 19% CTR today.

In one large portfolio that we have been testing, we have seen the RPC drop from $.33 a year ago down to $.30 in our most recent month.  Combing these two factors (RPC and CTR) yields a reduction in Revenue Per Thousand Impressions (RPM) from $75 down to $57.  This represents a 24% drop in RPM and a 24% drop in revenue for a portfolio with steady type-in traffic.  Of course, if your portfolio includes lots of expiring website domains, then you also experience declining traffic.  So, we are focusing on a more steady state situation, where the type-in traffic is fairly constant.

Next month, we will review some of the reasons why RPC, and therefore Revenue, has been declining for most domain portfolios. (Visit PPCIncome.com for more from Howard)  

NameDrive adds NDX Market and Templates

Many readers know that NameDrive was founded by a former Sedo employee.   Since that time there has been a healthy competition between these two firms.   Sedo has openly announced that their domain sales, (including auction sales at GreatDomains) have been providing steady income, even as domain parking income has fallen.  NameDrive announced their new NDX platform that will help you buy and sell domains, in direct competition with Afternic and Sedo. Don't look for the feature right away.  When you visit the site it is listed as "coming soon."

Oversee Cuts Staff just before DOMAINfest

Despite putting on a great show at DOMAINfest,Oversee.net, the parent company of DomainSponsor announced in January that it has laid off 38 employees – close to 20% of its workforce.  

The company cited a difficult economic environment expected in 2009 for the layoffs. The company reported that employees in Los Angeles, Florida and Oregon were affected. The  bulk of the layoffs reportedly occurred in Los Angeles where most of Oversee’s employees work. Oversee had already cut 10 percent of its workforce in August 2008.  It appears that Jothan Frakes and Ron Sheridan (Oversee's "first employee") may have been casualties.  Jothan has landed on his feet in a new venture called "Minds and Machines" targeting the new TLDs.  Ron moderated panels at DOMAINfest, but was rumored to be leaving immediately afterward.

The Los Angeles Business Journal reported that Oversee president "Jeff Kupietzky said most of the cuts occurred in new ventures and business units that had become less profitable, such as Web sites built around mortgages and ring tones. He said Oversee had started to see 'weaknesses' in advertising but that its core business of buying and registering Internet domain names remained strong".

“Given the tough economic situations, we are coming back to the basic strategy of our businesses where we have a leadership position or intend to have a leadership position,” he said. 

Videos to Come 

Look for video interviews of Jeff Kupietzky of Oversee.net, Daniel Law of NameDrive (and formerly of Sedo), and Donny Simonton of Parked to be released over the next few weeks.