Domains - Are You Really Maximzing Domain Value?

Written By: Michael Marchese

Many domain owners believe that by parking their domain names, they have maximized their potential, at least until they are sold to a retail buyer.   Using a traditional domain parking provider allows owners to be able to capture revenue from advertisements placed on a landing page.   Visitors, who happen to stumble upon their domains, by typing in the exact URL, are subjected to a bombardment of advertisements.   The few visitors that click on the ads generate advertising income.

Domain Owners Receive Pennies on the Dollar 

A small percentage of advertising revenue ends up in the pockets of the domain owner.   The majority of the money is split between the ad network(s) and parking provider.   In essence, the domain owner is at the far end of an advertising distribution channel that may involve as many as 5 layers between them and the actual advertiser. For a moment, imagine taking a dollar and removing 30% - 70% from it up to 5 times.   It is now possible to see how the $1.00 spent by the advertiser turns into $0.05 to the domain owner.   The sad truth is that the vast majority of domains parked by domain portfolio owners seldom earn enough parking income to offset their annual domain registration renewal costs.

A Small Number of Domains Carry the Total Portfolio
In life, people have heard of the 80/20 rule, whereby 80% of something is the result of 20% of the population.   In domain parking, the proportion is probably closer to 90/10, whereby 90% of a domain portfolio owner’s revenue comes from less than 10% of his domains.   Typically, performing domains are those that have commercial appeal and are one or two words, in length.   Domain investors use their success with a small percentage of their portfolio to subsidize the annual registration costs of all the non-performing domains.   To the reader, this may not sound like a viable, long-term business.   In fact, it is not.

Changing Domain Name Business
Starting with the ongoing recession of 2008, this business model has come under significant pressure.   Advertisers have been under increasing pressure to optimize the performance of their marketing campaigns, including their online advertising programs.   Within search advertising, the result has been a gradual move away from generic, top-level keywords, like “dress” toward long-tail keywords, such as “chiffon wedding dress”. Advertisers are finding that advertising on these long-tail keywords provides both a higher return on advertising spend (ROAS) and a lower overall cost per click (CPC).

The impact on domain portfolio owners has the potential to be devastating.   Those parked domain names that are one or two words, in length, are seeing a flat line or outright decline in advertising revenue. This stagnation has arrived, despite the best efforts of parking providers to optimize the performance of their landing pages.

Stagnating advertising revenue comes on the heels of sequential, annual price increases in the cost of renewing a domain name.   Several years ago, it was fairly common to obtain a domain renewal price under $7.00.   If one were to shop around today, he would see that many of the major domain registrars are charging between $9.00 and $12.00 per domain renewal.   Some domain extensions, such as .TV and .MOBI are even more.   When these price increases are combined with a stagnating revenue stream, profit margin compression ensues.  

Small Domain Portfolio Owners Face Extinction
As important, the conditions ripen for a dramatic consolidation among domain owners.   Those domain owners that have been able to innovate and move beyond traditional domain name parking stand to benefit greatly from the impending consolidation.   They will be able to pick up valuable domain name real estate at fire sale prices.   Those portfolio owners, who cannot make generational transition from domain parking to domain development, face extinction.

The Need for Domain Development
It is clear that domain owners need to find a viable, alternative to traditional domain parking. They need to do better than capture only the people, who came to the domain by typing in the URL.   They need to convert their domains into websites, and beginning capturing some of the visitors originating from search engines.   It does not mean that they have to capture the first position for search phrases related to their domain.   It simply means that the need to begin appearing within search engine results. Most search engines actively block parked domains from appearing in their search results.   The reason for this is twofold.   The first is content.   The second is visitor value.   Landing pages that are created by traditional, domain parking companies do not get indexed by search engines, because there is no content on the landing pages.   Furthermore, there is no value being provided to the visitor.

Mini Websites with Syndicated Content Equals Long-Term Domain Damage
In the last two to three years, a hybrid parking solution has emerged.   Instead of the parking provider creating a landing page, they now are creating mini-websites. 

Although an improvement over parking pages, these mini-websites have a fatal flaw associated with them.   The content that is placed onto these mini-websites has been licensed, or copied from other, published sources. The industry term for this is syndicated content.   The cost of this content to the parking provider is negligible.   Their businesses are not built to create and manage original content.   Furthermore, their business models would not be viable, if they had to incorporate the costs of original content development.   This is why they have chosen to offer a syndicated content solution.

Search Engines Block Websites with Duplicate Content
Although syndicated content websites bring more value to the user than an ad-filled landing page, they pollute search results.   Imagine doing a search on “gutter guards” and having five of the first ten results come back as the same article, but on five different websites.   Would you continue to use that search engine?

This is why search engines view these syndicated content parking solutions so negatively.   Search engines see these sites as nothing more than a blatant attempt to game their search engine algorithms.     It is not surprise that Google’s recent algorithm change, entitled “farmer”, specifically goes after such duplicate content farms.
  
The net results to domain portfolio owners can be catastrophic.   Not only do they lose up to 90% of their revenue, overnight and without notice, they also damage the long-term value of their domain names.   The damage comes in two forms.   First, many domains are valued based on a multiple of the monthly income they produce.   If the income drops dramatically, so does the domain’s valuation.  

Second, when a domain gets banned by the search engines, the domain gets flagged with a proverbial “scarlet letter” meaning that any new website developed using that domain name will be artificially penalized by the search engines, or in some cases blocked entirely.   The result is a damaged domain asset.   It can take weeks, and sometimes months, to file and win an appeal from the search engines.   Worse yet, the search engines will not grant an appeal, until a website, with unique, original content has been created and running for some time.

These results come from personal experience.  During Tempesta Media's first year in alpha development, we made the mistake of using licensed, syndicated content.  It did not matter that the content was properly licensed to Google.  Nor did it matter that our writing team provided original summaries of each licensed article.  It did not matter to Google.  All they saw was duplicate content.  Some of those original, company-owned websites are still not in Google's main index (while they now are for other search engines).  After learning such a hard lesson, we have focused exclusively on creating high-quality, well-researched original content in-house, through our team of talented writers.
  
Develop Your Domains Correctly, the First Time
If the domain owner had bypassed these hybrid solutions and went straight to developing an original content website, he would have been better off.   Even if he had initially created only one piece of well-written, original content, he would have been much better off.   The small number of website visitors originating from search engines would have had a much more valuable experience.

Scale vs. Return on Investment (ROI)
Mini websites that are developed from the ground up with original content do not need to achieve the first position in search engine results.   They need to generate a strong ROI for the domain owner. This fact is commonly overlooked by domain portfolio owners.

They think that they need to spend thousands of dollars, spend hundreds of hours of their time, and possess key technical, creative and marketing skills to be able to successfully develop their domains.   This is not true.   Yet, there are many web developers out there that market their solutions as the only way to achieve success.  

In the domain investment space, there are numerous companies springing up to assist domain owners in their domain development efforts.   These solutions fall into two groups.
  
Self-Service Domain Development Solutions
These companies provide a platform, filled with tools that allow domain owners to build their own websites.   Generally, the pricing is based on a monthly subscription model, varying from $10 to $100, or more, per month.   The number of domains included in the subscription varies dramatically.   Although some of these platforms are easy to use, they require a significant time investment and a certain level of expertise from the domain owner.  

The bigger obstacle for domain owners is achieving a satisfactory ROI.   If a domain is earning $1.00 per month, using a traditional parking provider, it has to earn significantly more, using the self-service solution.   Why?   The domain’s income has to increase substantially, in order to cover the costs of the self-service domain solution and the cost associated with the domain owner’s time.   Furthermore, the newly created website has to continue to perform at a high level.   This is because the cost of these services is charged on a monthly or quarterly basis.   The domain owner is constantly sinking additional money into these projects, without a clearly visible ROI.   Given the margin compression domain owners already face, coming up with a significant, ongoing capital outlay is not possible.   The money is simply not there.

Full-Service Domain Development Solutions
The second option available to domain owners is the one provided by full-service domain developers.   These companies handle all aspects of a domain’s development.   This includes website creation, hosting, content development, search engine optimization, and more.   The domain owner has the luxury of sitting back and having someone does all the work for him.
  
The problem with this approach comes down to ROI.   These services come with a significant, ongoing price tag.   It is not uncommon to see initial site creation costs of $250 - $5,000 and ongoing management costs of $100 or more per month.   Although the solution allows the domain owner to create a uniquely valuable website, the solution is only viable for the most valuable domain names.   Many two-word and most three and four word domain names would not be able to generate a sufficient amount of incremental revenue to cover the additional costs.

Domain Name - Back to Square One
So, the domain portfolio owner is right back where he started several years ago.   He is able to well-monetize the top ten percent of his portfolio, by developing his websites using a self-service or full-service domain development vendor.   Yet, the other 90%+ of his domains continue to languish and bleed money.   Is there another solution, a third option?   Fortunately, there is one.

Tempesta Media’s Intelligent Domain Parking Solution
Tempesta Media has recently launched its flagship domain development solution, called Intelligent Domain Parking.   The service squarely addresses the needs of domain owners to better monetize the other 90%+ of domains in their portfolios.

Our company's solution focuses on converting domain names into original content websites. These websites can now be seen by a search engine. Although we do incorporate search engine optimization into their solution, the search engine optimization that we do is purely on-page optimization. We also do not claim to be able to take your newly created website to the top of the search engine rankings. What we do believe is that by coupling direct type-in traffic with a moderate amount of search engine traffic, the result will provide substantial value to the domain operator.

Our company's true focus is on developing and deploying high-quality, original content that is tightly focused on the domain's specific niche and audience. Original, well-researched articles are published regularly. The articles include the profile and name of the specific writer. Writers are compensated on a performance basis, as is Tempesta Media. The objective is to make sure that Tempesta Media, our writers and the domain operator’s goals are aligned, with the goals being domain monetization and domain value enhancement.

For domain owners, Tempesta Media's solution is the best of all solutions. Domain owners get their websites developed, without major upfront and ongoing costs (they charge a $3.99 setup fee per domain). Like traditional domain parking, there is little effort required by the owner. All they need to do is login with their profile and monitor their results.

Finally, domain operators have the ability to sell the website with their domain. This can be accomplished one of two ways. If the buyer is also has a profile on Tempesta Media, the seller can easily transfer the website to the new owner, at no cost. If the buyer does not have a profile or does not wish to keep the website hosted at TempestaMedia.com, then the seller can log into their profile and unlock the specific website, making it available for download. The entire website, including the original content, is zipped up and available for download. There is a charge for taking ownership of the website.

Visitors also benefit from our solution. No longer are unsuspecting visitors greeted by a garbage landing page full of ads. Instead, they are able to find original content that is specifically related to the topic they were looking for in the first place. Happy visitors mean more repeat visitors for domain operators.

If you have a domain portfolio that is languishing at a traditional parking provider, you may want to look into Tempesta Media. You may find that their solution can help maximize your domains' values. Tempesta Media can be reached at http://www.TempestaMedia.com.