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• ---- Pricing for traffic domain names: There are still bargains in the marketplace.

Webwork - 5:12 pm on May 5, 2006 (gmt 0)

The multiples are all over the place.

The buying opportunity that businesses are overlooking is that whatever revenue multiple a business pays for an aftermarket domain right now that multiple is:

• A multiple of what the domainer's income is AND IF the domainer is receiving a 50% share of the PPC income from the feed sub-provider (domain parking company) AND IF the PPC feed sub-provider is receiving a 70% share of the feed source's (Overture, Google, etc.) income from advertisers THEN as an enduser/beneficiary of domain clicks you would otherwise have to buy you are actually buying a clickstream for about THIRTY PERCENT of the clickstream's near term cost to you. Get it? Using the current inefficient (to sellers) pricing model you are buying clicks at a SIXTY-FIVE PERCENT discount. Sounds like a deal to me.
• Simplified math to explain what I just said: Advertiser pays Overture \$1.00/click. Overture pays feed subprovider 70% of the advertising dollar or \$.70. Feed subprovider "shares" 50% of their \$.70 with domainer who parks their domain with subprovider. Domain gets 100 clicks/month, making domainer \$.35 x 100 or \$35/month. You pay domainer based upon domainers revenue X years. 1 year revenue = \$420. OTHO, if you had to pay for those 1,200 visitors you would have paid \$1,200. Do the math. You pay the domainer 8 years revenue (8 X \$420 = \$3,360). In 8 years you get clicks that, based upon today's costs, are worth \$9,600.
• The price of clicks hasn't been going down that much recently, has it? Buying upon a multiple of today's costs locks in your PPC "ad rate". :)
• By virtue of buying a "click source" (a type-in domain) you - as the new owner - are virtually removing click fraud from your accounting mix. (Who cares if a future click is bogus? Next . .)
• Direct navigation clicks are reputed to be highly filtered - that is, high conversion - traffic.

So, I've seen multiples of 6-18 months (for non-generic typos) to 10 years. Variables include:

• Is the domain "trendy" (FlashGames.com) or is it one that will stand the test of time? (Money.com)
• Is the domain inherently commercial? ("Turbines" versus "jokes")
• Is the industry connected to the domain just waking up to PPC? (If so, look for bid values and therefore PPC income to rise. Buy at the bargain.)

The folks that cut out the middlemen (have their own feeds, not a 50% share of a sub-provider's feed) - when they say they're paying "5 or 8 or 10 years future revenue" are actually only offering to pay FIFTY percent of the revenue for that period SINCE the domainer selling the domain is only expecting to receive 50%. The minute that the company with it's own direct feed acquires the domain the "8 years payout payment" is actually reduced to 4 years, since the holder of the feed that just acquired the domain is keeping 100% of the click revenue, not sharing it 50/50 with some domainer. (Is it possible that domain parking will open up so that more domainers qualify for direct (not sub-producer) feeds? I think so, especially for quality generics. Time will tell, benefit to the first mover. You listening Google or Overture?)

SO my advice: If you are buying a domain as someone looking to be an enduser/consumer of the clickstream then buy every domain you can right now from people who are convinced that they are getting a deal when you agree to pay them 8Xs their current revenue stream . . . if their revenue stream is coming from a feed sub-provider.

Think about it: \$1.00 clicks being purchased to \$.35, a steady stream of them, with no inflation, future fraud issues and nicely filtered and targeted traffic - where you don't give a hoot is visitor 18787 is simple curious. No extra cost. Next!

Get it?

[edited by: Webwork at 8:34 pm (utc) on May 5, 2006]