Standards - Part 10 - Our Google which art in…
Monday, April 14th, 2008 by admin
This is a follow on article in the series on transparency and standards.
The previous article examined how both Google and Yahoo have agreed to the standards outlined by the IAB but have not flowed the transparency down to domain owners. Because our industry is so small it’s been suggested that many of the strange policies that come down from on-high in both Google and Yahoo are often not aimed at us but others and domain owners just get caught in the cross fire. I personally don’t subscribe to this view as it would appear to mean that there are a lot of policies that “seem” to be impacting domain owners on a regular basis for the benefit of Google and Yahoo. Although there has been some consolidation the domain industry is still incredibly fragmented at each of the industry levels. I’m still amazed at the number of reasonable sized domainers that I’ve never met before but suddenly popup at one of the domain conferences. There are still too many parking companies and this is despite the recent closures of a few of them. In this fragmented market both Google and Yahoo can really do what they want and there really isn’t anyone large enough that can oppose them. There also isn’t a co-ordinated effort from domain owners to aggregate their traffic now or any time into the future. As an aside it’s been interesting to see how both Google and Yahoo have been restricting the number of new parking companies being launched by raising the “volume of traffic” bar before you can qualify for a direct agreement. While doing this they appear to be ensuring via their contracts that no parking company is achieving market dominance. It’s a very unusual industry that doesn’t have a single dominate player and whole group of companies fighting for second position. There does not appear to be a clear stand-out domain parking leader but rather quite a number of companies that are vying for first position. The real clincher has been the way that both Google and Yahoo are purposefully stifling innovation in the parking industry. The restrictions placed on template design, the development of other potentially lucrative revenue streams and a host of other innovate ideas is incredible. This could be seen as a blatant misuse of market power to reduce the ability of the industry to move forward. To understand what this all means we need appreciate the power of domain traffic. The following is a quotation from a case study conducted by Google in 2007 when they compared the conversion rates of domain versus search traffic for a particular customer. “When we analyzed the results, we were shocked. We didn’t expect to see that domain park sites can bring in the quality of traffic necessary to result in twice the conversion rates, at a cost-per-click that’s equal to that of search.”    When I read this report I congratulated our whole industry on the fact that we’ve managed to negotiate our way out of 50% of the revenue stream. It also means that although we are only 3% of Google/Yahoo’s revenue line we are actually punching at the 6% level of effectiveness. For the past 2 years Google has been reducing its margins to acquire greater volumes of traffic moving them down from 22% (Q1, 06) to 12% (Q4, 2007) (source: Google quarterly report). To put this in context if advertisers paid $1 per click (EPC) in Q1 2006 typical publishers would have been paid 78 cents (ignoring parking companies for the moment) and likewise in Q4 2007 they would be paid 88 cents. This would give an overall increase of 12.8% over 2006/7 but this is not the case for the domain channel. Since the domain channel is converting at double search our EPC was effectively 39 cents in 2006 and 44 cents in 2007. In reality the experience of many domainers has been that EPC rates have fallen by approximately 50% over the same period of time. This means that in 2007 we are being paid 22 cents while other publishers are being paid 88 cents for every dollar of advertising. The domain channel is cross subsidizing other content channel traffic such as mySpace and that they are reaping the benefits of our success. This is not surprising as the mySpace traffic is notoriously bad converting traffic. If you were Google I don’t think that this sort of information is actually what you want to communicate to today’s market. It’s much easier to make a multi-billion dollar deal look a lot better by reducing the income levels of a highly fragmented market and aggregating all the numbers together in a report for the analysts. Isn’t it nice to be needed! Source: Posted by Michael Gilmour — Original post on on Whizzbangsblog — March 17, 2008
