Here is the list of the previous articles in this series on the domain industry:
Part 1 - Domain Industry and Valuations
Part 2 - The domain bubble
Part 3 - What caused the domain bubble?
Part 4 - Domains and the sub-prime shock 
Part 5 - Domain values and opportunities
Part 6 - The Pressures on PPC
You can't pick up the newspaper or read a website today where the number one issue isn't the economy. Industry sector after industry sector is cutting costs, rationalizing processes and looking at how to streamline their business operations. A downturn tends to cause companies with bloated expense lines to go on a rapid diet.

Likewise I believe that it's time for the domain industry to do a little introspection and take a look at some of the substandard practices being adopted in the name of short-term gain.

What I find really surprising is the number of people I speak to that complain about the decline in PPC rates but then do nothing about it. The first thing that needs to be looked at is to ensure that your portfolio of domains does not have ANY fraudulent traffic. Some of us that are squeaky clean may be surprised to learn that a domain that we purchased a long time ago was actually a bot-enduced click farm.

Clean up your own house and ensure that your portfolio is adding value to your parking partners overall portfolio of domains. Find out why some domains have a low Click Through Rate (CTR), examine the trends in traffic and earnings per click. Basically, get dirty in the data.

Low CTR domains are often an absolute gold mine if just a little effort is put into them. Moving these domains from a 1% to 10% CTR means ten times the revenue generated! This will often have a great benefit for the advertiser as well as they get more targeted traffic to their sites.

Never forget that ultimately the people that pay us (the advertisers) want to accomplish a transaction at the end of spending advertising dollars. This means that it is in our long-term interest to ensure that we are providing value to the advertiser. The reason why some advertisers opt-out of the domain channel is because they believe that we are all fraudulent and they don't want to risk their hard earned money on a potentially bad sales channel. Maybe this is a job for the ICA but we need to reverse this image and get a positive message out to advertisers.

Just like Google, Yahoo and other players in the domain industry, domain owners need to take responsibility for their traffic. Stop placing irrelevant high paying keywords on garbage traffic where you cross your fingers for that $10 click. This is a short-term game and the message from the market is that it only wants to deal with long-term players.

I feel like a broken record saying this but.....we need to ensure that this type of behaviour is stamped out. I personally believe that there is no such thing as "bad" traffic (other than fraudulent or bot) but there is a LOT of badly targeted traffic that needs to be cleaned up. In my opinion, deliberately placing an unrelated  high value keyword on low value traffic is fraud. Just don't do it.

The challenge for domain owners is that a lot of this introspection takes a great deal of time and work. It also involves a change in mind-set from optimizing for revenue to optimizing for all stake-holders in the value chain. Remember that having a domain with traffic that no one wants to pay for because of past bad activities is not a good position to be in. Turning pristine real estate into a slum will ultimately only give you slum prices.

I must admit it that I spend a lot of my time building systems and cleaning up portfolios for domain owners. It's not because these people are "bad" in any sense but because I personally believe that domain traffic targeting and optimization is a specialized skill that requires a lot of work. Most domain owners have developed specialized skills in acquiring domains not in optimizing them. It may be time to do a little outsourcing of what is often a big headache!

The next article in the series will concentrate back on the yellow graph and where I see the domain industry in the future.

Over the last few weeks I've been analyzing the broader domain industry and in particular external impacts such as the financial meltdown. I've received a number of comments that suggest support my "gloom and doom" analysis of the current PPC market. Some people have even suggested that it looks like domain parking is a doomed business.

There are a few things that I would like to say that is contrary to the analysis to date and hopefully it will provide a ray of sunshine through the dark clouds. The first is that I'm only half way through the analysis and if you look at the graph that I've been exploring it finishes on a high point not a low point.

The second piece of good news is that domain owners control traffic and that traffic will always be valuable. In the future it may not be as valuable to the Google and Yahoo's as we may like it to be but it will be valuable to someone. The challenge for us all is to ensure that we constantly clean our traffic (the topic of the next article) so that we are adding value to advertisers.

The third point is that the current state of affairs with the wider economy will not last. At some point in time sentiment will swing around and investors will once again be looking at valuable, unique income producing assets (eg. domains). This will push the prices back up to what I believe will be very high levels.

I do apologise to all of those readers that have been reading about the gloom and doom. What I'm constantly looking for is how we can pull ourselves out of the trough of point B so that we can enjoy the fruits of point C as fast as possible. Remember, that next to every mountain is a deep valley. Let's start climbing out!

This is the 6th part of the series on PPC, domain valuations and the wider domain name industry. The previous parts can be read by clicking on the following links:

Part 1 - Domain Industry and Valuations
Part 2 - The domain bubble
Part 3 - What caused the domain bubble?
Part 4 - Domains and the sub-prime shock 
Part 5 - Domain values and opportunities

 Despite the robustness of the online advertising industry the current negative economic sentiment will flow and is flowing through to the domain industry. There are two reasons for this:

Google and Yahoo are both under pressure to over perform to maintain their share price in a massively declining market. Despite this focus both Google and Yahoo's share price has suffered enormously during to the US financial meltdown. Google is almost half what it was 12 months ago and we won't mention what has happened to Yahoo.

During these times it makes sense for Google/Yahoo management to focus on lowering expenses as well as increasing revenues. For example, for the past 3 years Google has been reducing its Traffic Acquisition Costs (TAC) from a high of 37.2% to last quarter reporting it to be 28.4% of revenue paid out to publishers. This claw-back in revenue goes straight to Google's bottom line and helps inflate their margins.

I'm a firm believer in the philosophy of, "follow the money and you will find the motivation". The Google TAC graph below clearly shows that Google has been reducing it's payout to publishing partners (ie. domainers) while their partners have been bringing in more revenue overall.

The lack of transparency in the domain channel has meant that it is possible that either or both advertising aggregators (ie. Google/Yahoo) have the power to aggressively curb domainer traffic payout rates. This can easily be accomplished by tweaking either the smart pricing (Google) or quality score (Yahoo) algorithms adopted by either company.

The end result of the corporate pressures on both Google and Yahoo are lower PPC (pay per click) rates flowing onto domain owners. Anecdotal evidence suggests that the clear strategy adopted by both companies has resulted in a decline of up to 25% in overall PPC revenue be domain owners since the beginning of the year.

The eight hundred pound gorilla seems to be flexing its muscles in an effort to defend its position as king of the Internet jungle. Google's dominance in this space is scary but their reactions are fairly predictable of a company that has risen to ascendency over its competitors. None of us should be surprised by the pressure on PPC rates due to an economically rational partner further up the supply chain.

The second pressure on PPC payout rates will come from the advertisers themselves. When times get tough pressure comes to squeeze out a little more from a lot less. During this time I would not be surprised if a lot of online marketing executives get their first real education on what bidding for a keyword is all about. As they get smarter and continue experimenting with a wider range of keywords any domain owner that leaves their keywords alone is likely to get punished in the cross-fire.

For example, an advertiser that was once paying $1000 per day on the keyword mortgage may now diversify into "auctions", "selling your home", "sub-prime" etc. If a domain owner leaves the keyword set as mortgage then the reduced spend on the keyword will have an overall detrimental effect on the revenue performance of the domain.

The next article in the series will place domain owners under the microscope and how many of us need to change our practices for the long-term benefit of the value of our investments and bank accounts.

It's Saturday and another busy week is behind me. The economic backwash from the global financial crisis still continues to unravel. Like the stock market the TRAFFIC auctions produced some incredible bargains which will put a smile on the face of the buyers in a few years time.

This article isn't about domains or anything else of importance to the domain industry. You see, this week was the week where I had my final private pilot's license test.

The day dawned with a daunting 30-35 knot wind blowing across the aerodrome and my tester asked me if I really wanted to go up that day. After calling a few of the places where I would be headed I decided to give it a go. After all, if I failed it was only money. It would seem to me that it was a lot less money then what Washington Mutual Bank lost in about 10 seconds.

Off I went, flying through controlled airspace to Essendon airport (just near Melbourne airport) only to find that the airport was packed with other planes and we ended up waiting to provided access and a clearance for take-off.

We then headed down to La Trobe valley to the east of Melbourne. It's magnificent green countryside and the although the wind made the plane dodge around the air like a fly against a window we managed to make it. We had a bit of a scare with another plane declaring that they were leaving only to have them announce they were turning downwind just before we made our call. All was well, as the other plane then clarified their position and headed out east away from the airport.

After a touch and go on the runway my tester cut the engine on take-off (which was a bit of a fright) to see what I would do. Nose down to gain glide speed and all was well as he pushed the throttle to full open again.....thank goodness that I managed to pass that one.

He then threw a curve ball at me and changed our next destination to another aerodrome. Nothing like a change to get the protractor and ruler out on the map as you're flying along. After seventeen minutes we reached our destination and conducted a forced landing (yes, another pretend engine failure).

We were finally on our return journey back home when he decided to throw a bunch of stalls, steep turns and then low level flying in my direction. After completing those I finally saw the home runway, made my radio calls and we chugged along directly into a wind that was gusting at 35 knots just off the nose. Other then a slight ballooning on landing (because of a gust) the landing was uneventful so I taxied to the parking area, shut the plane down and after cleaning up the plane went and met the tester inside the club house.

It was then that he said the magical words, "Congratulations, you've passed." I must admit it that I was pretty excited about finally getting my private pilots license. There's nothing quite like working away at something over a period of time and then having the satisfaction of reaching the goal.

If you have a goal in life, no matter how crazy, don't give up. I'm sure that you can do it. A few years ago I wouldn't have dreamed of being able to become a pilot, who knows what can happen in a few short years? Just dream big, dream long and don't let anyone put your dream out.

Over the last few articles in this series we've been discussing what's been going on in the industry and why PPC rates have fallen and domain valuations have dropped considerably. You can read the previous articles via the following links.
Part 1 - Domain Industry and Valuations
Part 2 - The domain bubble
Part 3 - What caused the domain bubble?
Part 4 - Domains and the sub-prime shock

As I've previously stated, a result of both internal and external pressures at point B in the chart has resulted in a mini domain name recession. The recent demise of Lehmann Brothers, the sale of Merrill Lynch and the collapse and subsequent bale out of AIG by the US government is a clear indication that all is not well in the wider economy.

This downturn in the economy is both bad and good for investors. Obviously the bad is if you have a whole lot of stocks where the share price has just taken a tumble. The good is if you are cashed up then there are some real bargains available for purchase.

Think about the implications of this for the domain industry. Investors can pick up blue chip stocks for half the price that they were 12 months ago and you have guaranteed liquidity. Domains on the other hand are still largely viewed as a speculative investment that in some cases is perceived to have a legal risk associated with them and it can be quite difficult to exit the investment profitably.

In addition, the major players (Google/Yahoo) have complete control over the revenue line generated by any traffic associated with the investment. This represents significant risk as compared to a blue-chip stock.

I believe that these pressures are rising to a peak and we are fast approaching the bottom of the domain recession. In a similar fashion, those investors that are cashed up will be able to pick up some incredible bargains that many people will wonder at in the years ahead.

Both Rick and Howard (founders of TRAFFIC) took a substantial risk in focusing on auctions for the New York conference. In Australian speak, "It was a guts move". The sales will either show that the recession has passed or that we still have a little way to go. I've got to hand it to Rick and Howard that their timing is absolutely perfect and it is likely that NYC TRAFFIC will set a benchmark for domain valuations. I just wish I was there to see the action.

I just read a few posts (unverified) from the first TRAFFIC auctions and it appears that the prices are a little lower than expected. Most of the names are selling due to reduced reserves....hence the recession is a place to make a lot of money for those that are cashed up.

A final thought, as the wider market picks up, expect investors to search around for higher returning investments and don't be surprised if domains come back on their radar. Remember, you make more money in recessions than the good times or in other words you make your money when you buy not when you sell.

Domain Wiki: Rick Schwartz, Howard Neu, TRAFFIC

This coming week is TRAFFICC New York and the show is shaping up to once again be an outstanding event domainers flocking to it from all over the world. Sadly, for the first time in I don't remember when I won't be attending TRAFFICC in NYC.

I've been travelling a lot this past few years and after discussions with my family the decision was made for me to stay at home. I will certainly miss all the excitement of TRAFFICC but more importantly the high quality people that I now have the privilege of calling friends.

Both Rick and Howard and their families have worked enormously hard to build the TRAFFICC events into a central gathering place for the whole industry. I think that it's outstanding that they have done this, reaped some rewards along the journey and more importantly endeavoured to remain creative and energetic with fresh approaches to the conference.

The introduction of multiple auctions with exceptionally high quality domains will certainly add some sparkle. Also, as normal there are some outstanding sessions to attend covering topics as diverse as "domainers vs. monetizers", "End user experiences", "CEOs from top companies" to name a few of the highlights.

Of course we all know that it's at the parties that the deals are really done and as normal I'm sure that there will be a lot of official and unofficial parties going on. So make sure that you get along to as many as you can, get to know a lot of great people and you never know, that big deal may be just around the corner.

For all those conspiracy theorists out there....I have ALWAYS done exceptional business at TRAFFICC and I'm not attending for personal reasons (just a bit worn out with all of the travel this year!) and not because I suddenly don't like TRAFFICC. I think that it's a fantastic event and I'm sure that you'll be seeing me across in the USA again first up next year!

I would like to say "hi" to all of my friends at TRAFFICC from the land downunder and I hope that I'll see you all in November at TRAFFICC Downunder.....it's one event I won't be missing! In the meantime I'm only a skype call away :-)

Domain Wiki: TRAFFICC