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“Changes in Latitude, Changes in Attitude” of the Domain Industry

Like the Jimmy Buffett song lyrics states, “nothing remains quite the same”. This is ever so true within the domain industry. There are changes all around us, and many of us struggle with the changes. Please note that I used the word “us” rather than “you”, because I sometimes include “me” amongst the group I am talking about.

The domain industry was once pretty simple to understand. Domain value to the owner of the domain was dictated by usage of that domain.

PPC Usage: If the domain was used in a pay per click service, the domain needed to have either substantial direct navigation traffic or extraordinary pay per click dollars being spent by advertisers. If the domain scored high in both areas, the domain was a premium domain. If it scored poorly in both categories, it was of little value. If it was in the middle, the domain needed to offset its annual renewal fee, else it would be sold or dropped.

Brand Usage: If the domain was used as a brand, it needed to be short and memorable. The domain could be from a classical marketing thinking about brand, meaning that the word has little or no meaning until you assign it meaning. Examples of this is Google.com, Yahoo.com, Ebay.com. Alternatively it could be a generic brand, whereby the domain clearly specifies the nature of the business one would expect when going to the website using the domain. The best of class would be the single word generic keyword type domains that not only defined the product or services, but also inherently had built in direct navigation traffic. Examples of this would be: Cars.com, Candy.com, Travel.com. Domains were harder to value when used as brands, but they were nevertheless valuable as domain sales history documents.

Affiliate Marketing: The key to success here was choosing domains that fit a niche and could drive targeted traffic to Affiliate networks. The domains in this category would be two or three word combinations that defined a niche. The domain depended upon both search engine traffic and direct navigation traffic. These domains enjoy an advantage in Google searches, when the keyword a user is searching on matches in part or exactly the keyword within the domain string. If there was an exact match of the searched keyword to the domain string the website using that domain would get bonus points in terms of search relevancy and that would improve on the positioning in the search engine results for the Website using that domain. The domain’s value could be measured by the revenue that the domain drove into the Affiliate network.  The most attractive domains could be predicted by analyzing search term frequency at Google compared to the number of indexed websites that also match on the keyword term.

The Changes: In all cases, the value of the domain was first dependent upon how it was to be used, and then it was dependent upon factors related to that use. As of the time this article is written, things are much the same as they have been, but you can see, hear, and smell the changes coming. How will these changes impact the value of domains? That remains to be seen. Let’s look at a few of the changes and what impact it may have on the status quo.

1. Pay Per Click industry has changed.Google a few years ago cracked down on PPC companies to eliminate click fraud. Many in the PPC world will tell you that Google got a little over zealous and grouped some legitimate traffic with fraudulent traffic. This reduced payouts to domain owners and thus reduced the value of their properties because value is often measured in terms of revenue per domain over a given period of time.The other big hit on the PPC market was a result of Google allowing advertisers to opt out of domain traffic. The 2005 study of Internet traffic by WebSideStory’s StatMarket division revealed that direct navigation traffic such as browser type-in traffic, bookmarks of existing sites, and visits to existing, known website domain names converts into sales for advertisers at 4.23% of total visits compared to 2.3% for product and service related searches performed via the search box at search engines such as Google and Yahoo. Despite that research, Google gave in to advertisers desire to opt out of that traffic. This again reduced the earnings of domain assets and reduced the value of these domains.Lastly a weaker economy caused many companies to actually do more business online. Advertisement spending has increased year after year, but less of those dollars flowed into PPC networks as advertisers were given new choices for promoting their services at such places as Facebook, YouTube, and contextual advertisement. Again, less earnings is reflected in lower domain value for domains used this way.
2. The potential impact of new TLDs has caused the status quo to raise their eyebrow out of concern of the unknown. If you want a real quick overview of the potential impact these new domain may have on the world, visit http://www.beyonddotcom.info. Nice site and good job presenting a case for new domain tlds.While it is likely that the first wave of these new TLDs will not become available to the mass market until 2013, the reality is that they are already stirring things up. Examples of changes that may happen are Google must update its algorithm to not only accommodate these new TLDs, but also they must decide what if any impact the TLD will have on the search relevancy of a given keyword. For example, if I am searching the latest and greatest iPad from Apple, which would be a more trusted site in the eyes of Google and the hoards of people using the search engine? Would it be iPads.com or iPads.Apple? Trust is a major component of their thinking and it has to be a factor when dealing with their search algorithm. Or will it? Consumers get frustrated by false hits and crappy sites when they are searching for information, products, or services. I know when I am doing research I go to specific sites that I trust for authentic information, verses taking my chances with a resource I am unfamiliar with.Will these new TLDs raise the level of trust in the mind of the internet users? If it does, then things may change in terms of the value of our domains. I am of the personal opinion that in the short term our domains will hold their value and might even increase as a result of market confusion. Long term view is quite different though.

No doubt there will be plenty of changes to come. With changes comes confusion but also opportunity. Opportunity for those who are paying attention and are ready to make their mark in the new world. To those that have the attitude that things will stay the same, I cannot help but think another lyric in the Jimmy Buffett song that says: “All of the faces and all of the places, Wonderin’ where they all disappeared.”