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The buying opportunity that businesses are overlooking is that whatever revenue multiple a business pays for an aftermarket domain right now that multiple is:
So, I've seen multiples of 6-18 months (for non-generic typos) to 10 years. Variables include:
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!
[edited by: Webwork at 8:34 pm (utc) on May 5, 2006]
But as you said if one is the end consumer of the clickstream (merchants) they still have a price advantage and can beat other investors.
It's the endusers - anyone running an ecommerce site or anyone running an affiliate website, that is "people who buy clicks" - and webmasters/SEOs/SEMs who buy clicks on behalf of clients who ought to be wading into this market and aggresively spearfishing targeted domains or, at the very least, telling their clients "now is the time to buy".
As endusers of click generating domains, even if you offer 12 years revenue - to beat out the aggregators - you will make up your investment in 4 years - assuming that cost-per-click stays at today's levels. (And assuming a 70% discount to enduser click cost as explained above.)
Unless the architects of the WWW change everything that makes the URL model of web hosting and web surfing work the benefit to the enduser is a very nice clickstream after year 2, 3 or 4 that could be worth $thousands for the mere price of the domain renewal.
Speculative investing has risks but so does building a business model based either solely upon search engine ranking OR PPC. PPC could eventually be used to squeeze out players simply by larger players knocking smaller players out of bid placement.
People need to have a multi-facted online strategy for driving traffic and traffic domains ought to be a tool in every webmasters toolchest.
I think that the assumption that a parked domain will continue to get traffic for a decade regardless is erronous. This assumes that the search engines continue to miss the mark in search OR that users continue to guess domain names.
Both of these are only assumptions. By contrast I assume that search engines will - more and more - work out that users are not looking for a parked domain, but an active one. I also assume that users and user interfaces will continue to evolve so that users more and more work within an increasingly empowered environment which gets them to where they planned to go right off the bat.
Now - if you own a commercially viable domain, then the reason to buy a parked domain will entirely negate any value formulae based on parked income - a buyer will buy the domain to activate it and past income will be irrelevent.
(Dixon ducks as he runs out of the domain name forum in haste)
Sure it has the "potential" to make more money by cutting out middlemen. But "potential" is the BS that sellers use when they run out of other good justification for the asking price.
the assumption that a parked domain will continue to get traffic for a decade regardless is erronous
This is the internet. I wouldn't assume continued traffic for even in excess of a year.
what does that do to type ins? how many wrong guesses do people make before they start using the nice box right next to it that tends to offer greater relevancy than random stabs?
IMHO if the traffic is type in (instead of following links, bookmarks, etc) in many markets you could expect a huge decrease in that traffic in the next 12 to 24 months.
A domain name with steady type-in traffic on the other hand bucks that trend, because even while PPC rates and online advertising expenditure go up (there is a broad consensus of industry reports that suggest that will be the case, for the next 4-5 years at least) the domain will continue to generate "free" traffic day in, day out.
Up to now, it would appear that the typein traffic trend is up i.e. that a generic domain is getting more typeins today than a year ago, and more still than 2 years ago etc. So while that trend may well decline or reverse itself, the continually increasing value of traffic (when measured by the alternative yardstick of having to buy it via PPC or organically SEO for it) will preserve typein traffic values.
how many wrong guesses do people make before they start using the nice box right next to it that tends to offer greater relevancy than random stabs?
That's a point no one has entered into their figures, even though we're looking at several other unknown variables. I'm not really worried about it today, but I think it becomes a real issue when we are talking about 5, 8, or 10 years out.
We don't really know what the landscape will look like or how people will interact with their browsers and computers over that timeframe. I think most of us believe that users get more savvy over time, and I think that does reduce type-ins as the rate of new people discovering the web slows. Since we're speaking english, I'm talking about the english speaking web. Most likely, there will be other languages and conventions going along with those languages and conventions that will provide opportunities for the same reasons.
in other words, the search engines get less and less "willing" to hand over traffic for free....A domain name with steady type-in traffic on the other hand bucks that trend
The cosiness between browser developers and SEs could see the SEs interrupting the flow of traffic to parked domains. Audacious? Illegal? It's already been tried in the name of "improving user experience". How far is a parked domain from a one page site with very little content? As awall19 pointed out, IE could wipe circa 90% of the type-in traffic away with a single sweep of its paw. A realistic price should reflect this risk.
For the big players different economics apply. A large portfolio of domains give them bulk buying negotiation and other benefits which could compensate for them paying in excess of 12 months' income. For other buyers hmmm... the valuations differ wildly depending on whether you're buying or selling.
Random type-in traffic has no value. The users would never have landed on your page had they known what was there. Once they see it is a parked domain, they will quickly leave and never return to your page again. Besides, how much traffic does your parked domain generate compared to a REAL website? Let's compare it to THIS site for example. Your parked domain generates nothing but a *trickle* of garbage traffic compared to any truely active web site.
The value of a parked domain name is NOT the level of garbage traffic that is unfortunate enough to land on your page full of text ads. Potential for the domain name to generate dollars for someone who ACTIVATES it and builds a real destination for users is what determines its value to a buyer.
Also, someone who buys a parked domain in order to leave it parked and thinks they will proffit off of garbage traffic and adsense is an idiot.
PLEASE somebody tell me that I am just misreading the point of this post.
Random type-in traffic has no value.
Ah, but it's not random at all. It's hyper-targeted to the keyword/keyphrase the person just typed in to reach the domain.
For example, if they are looking to buy "green widgets" and decide on reflection to start their shopping search at greenwidgets.com (as some percentage of people will if it's a very popular subject) then it's hard to imagine more qualified traffic for that particular niche! You've got people who are genuinely interested in "green widgets" AND who are web-savvy enough to know how to type in a domain name on the off-chance it is relevant.
If I am reading correctly, we have a bunch of "domain parkers" here discussing the value of their bogus web sites based on people being tricked into pulling up their page full of useless text ads. YOUR *WEB SITE* HAS NO VALUE!
Yeah, you're missing it...
We were talkng about domains, not *WEB SITES* here.
Nobody is "tricked" into typing a domain into their browser.
If you've ever purchased a domain from anyone and want to say that a domain has no value, you'll have to figure out why you bought something that had no value.
Even if it was 4 dollars for a year of rights, tell us why you would do such a thing? Teach us.
Nice to see Edwin on this forum by the way. Hope your portfolio is performing well :-)
Type-in traffic domains aren't for parking only. Once developed, subject matter domains continue to benefit from type-in traffic.
Some of the best reasons I can think of for owning natural/generic domain names are:
It's all speculative, but what's more probable:
I see type-in domain names as a form of insurance policy: People pay handsomely for health insurance or car insurance each year, to address a risk. You can put all your eggs in one basket - SEO or PPC - and see what happens or you can develop a strategy that addresses a variety of risks.
Type-in traffic as a basis for assigning value to a domain name is just one component of rationalizing a domain as capital, as an income producting asset. Type-in traffic isn't the sine qua non of value, however it's definitely provided one basis for valuing domain names.
The objective of my post #2 was to nudge some people, give a little wake up call. Where I think some people are missing the boat is that domainers are waking up to the potential of developing their holdings. Some may also be waking up to the fact that they have been undervaluing their holdings.
Others - webmasters, ecommerce site operators - may be waking up to the possibility that the market has been undervaluing traffic domain names and now might be a good time to buy.
Natural URLs will be increasingly developed and the continuing development of natural names will increase the likelihood that websurfers will "go direct" - type in subject matter URLs - MiamiWidgets.com
Possibly. But we mustn't forget that .com isn't the only TLD. Perhaps users will become sophisticated enough to try local country TLDs.
+ lots more
Then they could start using hyphens. Or something else. I can't see them continuing to type in redwidgets.com and redwidgets.com only. Counting on the natural laziness inherent in humans it's easy to see them dropping the TLD altogether and typing in just redwidgets and trusting the browser to do the rest for them. (That's already happening a lot!) What use is owning redwidgets.com if IE7 + MSN AdCenter divert that user to affilliate-company.com/red-widget.html?
Since you ask what's more likely... I think it's more likely that Firefox will buy IE7 than it is for the average widget.com domain to keep gaining traffic from "widget" type-ins. ;)
Yes, I think stock of type-in domains is highly over-valued and I'm not buying even they drop by 50%. I don't see them as insurance but more as small players in a larger game and players who are increasingly diminishing in value.
the market has been undervaluing traffic domain names and now might be a good time to buy.
BTW, developing content for a type-in domain doesn't happen by itself. If you have to do it on a large (and possibly diverse) portfolio of domains it may take you years to recover the cost... if the other risks don't explode in your face.
Possibly but they woudl rarely become sophisticated enough to start visiting widgets.biz .info etc so .com is still the king
"BTW, developing content for a type-in domain doesn't happen by itself. If you have to do it on a large (and possibly diverse) portfolio of domains it may take you years to recover the cost... if the other risks don't explode in your face. "
Yes but you can also not develope them,keep them parked or forward teh traffic to an affiliate program which will make you even more $$ if you know what the visitors are looking for no?
How did I know that?
Do NOT sell on the cheap to OddSod.
... be interested in knowing some more about these domain names you believe are "undervalued" :)
BTW, I put my money where my mouth is: I believe domains are vastly over-valued at present (and over-hyped) so I'm buying other investments and avoiding type-ins.