Your Domain Parking Monetization
is Under-Performing
Alex
Tajirian
May 10, 2006
Abstract
The essay evaluates the general performance of the domain name parking
monetization services. It provides support for under-performance,
points out the reasons for its persistence, and clarifies the motivation
behind the essay.
Introduction
Performance evaluation can be measured in relative and absolute
terms. The former ranks each performance subject based on some measure.
‘Revenue per 1,000 impressions’ (RPM) is the commonly used in monetization
performance comparisons. However, the major limitation of such a
comparison is that it ignores the question of whether the top performance
is best, or, at least, ‘good enough.’ Thus, using an absolute measure
of performance is an imperative for domain name owners and service
providers. For example, a grade of A+ represents the best possible
absolute performance.
In the absence of such a standard performance
measure, one needs to rely on a performance maximization model and
on the existence of a market mechanism to discipline bad performance.
For example, the market disciplining mechanism for corporate performance
is takeovers. Nevertheless, relative performance can be informative,
especially when there are significant performance clusters.
The objective of domain monetization service providers
is to maximize their profit, which maximizes the profit from the
portfolio of domain names under management. This, objective, however,
does not necessarily imply that the revenue of each domain name
owner is also maximized.
Evidence
There are two components of revenue maximization: allocating of
traffic to the highest paying advertisers and enhancing landing-page
design - an art and a science - to maximize the likelihood of clicks
by searchers and to optimize search engine ranking. The focus of
this paper is on traffic allocation, as it is the subject of the
review article [1].
The performance analysis is based on an essay
on the parking methodology of a leading monetization service provider.
The essay, “A Review of Dan Warner’s ‘Traffic Targeting and Wastage,’”
[1] provides the smoking gun for an inferior modeling practice,
although the opinions of the company’s COO may not reflect the company’s
true monetization strategy. Moreover, comparing the relative performance
results gives a solid picture of the industry’s performance in general.
One can look at performance data provided by PPCIncome.com.
Although the data collection methodology may not be scientific,
an examination of performance trends can shed light on relative
performance. Below is a summary of the current performance data:
Performance Data |
Rank |
Company |
RPM ($) |
1 |
SmartName |
120 |
2 |
DomainSponsor |
65 |
5 |
Fabulous |
30 |
11 |
NetVisiblity |
5 |
The above table suggests that there is a relatively
high performance among the group. However, more historical data
is needed to determine the statistical significance of ranking.
Nevertheless, Fabulous has ranked near the top of the unrestricted
service providers, those that don’t require a minimum traffic or
the number of domain names owned by a client.
Thus, if a historical leader seems to be under-performing,
so are the rest of the service providers.
Why it Persists?
As noted earlier, under-performance can be sustained if there is
no performance disciplining mechanism. Below are the reasons for
the lack of such a mechanism for domain name monetization services:
-
Service providers lack quantitative sophistication,
as evidenced by the review [1]. Obviously, the service providers
are unaware of their lack of skills; otherwise they would have
utilized such techniques to maximize their profits.
-
The job of industry specific, as well as the
major media, companies is to report news and act as cheerleaders
for a segment of the stakeholders. They have no incentive to
dig deeper. One notable exception is circleID, but its focus
is on a different area, namely, on domain name infrastructure.
It should be noted that a request to publish the review of the
article [1] was declined by the editor/publisher of the original
article.
-
Companies like iREIT and Marchex may be using
sophisticated optimization techniques. However, their business
model is based on optimizing revenue from their own domain names,
and thus, it is not easy to measure their monetization performance.
Moreover, inference from their stock market performance (Marchex
is listed on NASDAQ) is futile, as market prices reflect the
average performance over the company’s various lines of business.
Nevertheless, my hat’s off to them! They have been able to raise
tens of millions of dollars, which requires evidence of solid
performance.
-
A large number of online reviews are not
dated nor updated. Thus, the publicly available information
may be outdated.
-
Domain name owners seem to be only concerned
with relative performance measures. When making allocation decisions,
they compare the performance of their portfolio with others
in the industry. However, this allocation tactic provides only
the best performance among potentially inferior performances,
i.e., not necessarily the best absolute performance.
-
Allocation advisers and aggregators, not
unlike the owners, use an incorrect performance yardstick. However,
they have a large number of domain names to allocate among various
service providers giving them better information on relative
performance compared to the average domain name owner.
Motivation
This paper is part of my campaign to raise funds through increasing
the awareness of VCs and private equity firms of the tremendous
investment opportunities in the domain name industry.
Concluding Remarks
Some of the service providers seem to be using the wrong performance
objective. Moreover, the industry, at its current stage of development,
lacks a disciplining mechanism, and thus, under-performance can
persist.
References
[1] Alex Tajirian, “A Review
of Dan Warner’s ‘Traffic Targeting and Wastage,’” DomainMart.
[2] PPCIncome.com
Topic tags: parking
Connect & Share
|