Domainers Must Ride Waves of Advertising Changes or Wipe Out

and when they want to view them. 

Furthermore, the ability to derive revenue from advertisements that interrupt internet surfing or TV viewing and cannot demonstrate a definitive impact on the targeted audience is coming to a rapid end according to IBM’s survey of 2,400 consumers in 5 countries and interviews with 80 advertising executives and experts.

Then, on January 23, 2008 the Special Meeting of the Internet Corporation for Assigned Numbers and Names (ICANN) Board of Directors voted to make their domain registrar transaction fee nonrefundable and discontinue the exemption for domain tasting in an effort to stop both domain tasting and frontrunning.  

Adding insult to domain speculators’ injury, on Feb. 11, 2008 Google began blocking AdSense for Domains on domains less than 5 days old and those that Google suspects are used for domain kiting—a common practice whereby domain speculators postpone paying for the domains they purchased by deleting recently acquired domain names just as the grace period expires and then re-reregistering the names for another grace period. Google’s intent is to curtail domain kiting, but depending on how AdSense blocking algorithms are implemented, Google’s move is likely to impact many forms of domain tasting—the 5 day grace period commonly used by speculators to register millions of temporary domain names, use AdSense to test the name’s ability to generate revenue, and return unprofitable domain names at no cost to themselves if they fail to generate sufficient advertising revenue. Google actions are also designed to prevent future litigation from angry trademark holders who are victims of domain kiting and are suing for millions of dollars in trademark violation damages using forgery laws because those laws carry a significantly higher penalty than trademark violations.

While many domainers seem content with how they currently monetize their domains, others believe the industry’s parking platforms have hit a plateau with few or minimal changes made to advertising features or strategies over the past few years.  As traditional advertising loses its effectiveness and the ability to impact a highly targeted audience becomes increasingly more challenging, multimedia technologies, new advertising and monetization strategies, and social networking are increasingly generating higher revenue.  They also create good monetary opportunities for domainers willing to use those technologies along with sound business practices when buying and selling domains.

“Control has shifted from content owners to consumers who are exhibiting greater preferences for how they receive and interact with content as well as marketing and advertising messages thrown their way,” said Karen Feldman, IBM Institute for Business Value Media and Entertainment Leader and one of the authors of the white paper.  “There is a shift away from interruption advertising to more interactive and personalized formats as consumers demand more control over how they filter, distribute, and consume their content, and associated advertising messages. Personal time on the PC now rivals personal time in front of TV and we expect a greater emphasis on new types of advertising content, greater relevancy, and personalization because consumers have the ability to block and filter out those messages they don’t want to see.”

Interactive formats are projected to grow nearly 5 times that of traditional advertising, leaving little room for domainers who resist change and don’t capitalize on the industry shifts to maximize their revenue generating potential. IBM finds the use of social-networking and user-generated content sites supersede almost any other category and notes the following findings among it’s U.S. users:

•    45% use social networking sites (ie: MySpace)
•    29% visit user generated content sites (ie: blogs)
•    24% use a music service (ie: iTunes)
•    24% subscribe to premium television content

Innovative and affordable technologies allow semiprofessionals and amateurs to create and derive economic value from low cost and more compelling content and messaging without using creative or professional agencies. Consumers are increasingly more involved in disseminating these new messaging formats partly due to increased social or community networking.

Two-thirds of advertising experts IBM surveyed expect 20 percent of advertising revenue to move within three years from ads based on estimated impressions to ads proven to have a real impact on consumers.  “We see a shift away from more nebulous advertising models to advertising that targets a specific audience,” said Feldman. “Advertisers need to utilize a broader set of advertising formats and create consumer-centric marketing plans that reach the consumer across all the various devices, platforms, and formats they use. Demand is growing for more accountability and consumer impact-based measurements across advertising platforms. Consequently, we believe that company owned, non-branded sites like Johnson & Johnson’s Baby.com (www.baby.com) are doing so well because they are able to capitalize on the rise in affinity based communities to capture, disseminate, and share information (and relevant advertisements) with others.”

More than half of IBM respondents expect that in the next 5 years open or self-service advertising exchanges (like Google’s AdSense or similar solutions from Yahoo, AOL, and others) will take 30 percent of the traditional broadcasters and other proprietary media channel revenues that were formerly unavailable to consumers or companies.  “Technology players like Google are able to simplify the buying and selling process which has historically been very complex,” said Feldman.

In the next 5 years IBM envisions new marketing formats such as consumer opt-ins, consumer self-programming, etc. to prevail allowing any individual advertiser to reach any individual consumer with target specific information.  A majority of advertising executives told IBM they anticipate advertising revenue to shift to search, mobile, Internet Protocol Television (IPTV), video on demand (VOD), and online video ads.

“We see internet advertising as the big growth driver behind this shift,” said Louisa Shipnuck, a Business Development Executive for IBM’s Global Media and Entertainment Industry and one of the authors of the report.  “Internet advertising will not only be cannibalizing from other categories such as traditional direct marketing, broadcast TV, etc. but also growing at a pace that far eclipses any other categories.”

“I agree with IBM’s findings and believe that the type of advertising--whether it is for domains or TV—has to change and become more engaging,” said Rick Schwartz, CEO, President, and co-founder of T.R.A.F.F.I.C. and eRealestate.com.  “To generate revenue in light of all these recent events, advertisers have to go further than relying on the one dimensional ads of the past.  If the domain name is not descriptive or informative enough to get someone to go directly to the site to find what they are searching for, then website owners have to do the physical work and use more personalized and entertaining solutions to get people to find their sites.”

“The fact that advertising is moving away from the more traditional model is good for domaining because it encourages the implementation of multimedia and interactive advertising.  This would improve the overall experience for the user and ultimately the domainer since it yields more revenue as a result of increased stickiness and relevancy,” said Michelle Miller, founder and CEO of WebVerb.com, a company providing operational, domain and strategic consulting services.  “The current parking platforms are flat and domainers need more creative tools and parking services.   There are many new multimedia and interactive features that domainers haven’t tapped into yet.”

Schwartz also believes it takes more than simple advertising to be a successful and said. “There is a major disconnect between traditional Madison Avenue types of advertisers, successful domainers, and internet customers.  Advertisers believe they need a commercial before they can ever get a customer.  Successful domainers know that when you match the surfer with exactly what they are searching for, you have the customer and all you do is just sell them what they came to buy.”

“I had a business plan in mind for every domain I ever bought, said Schwartz.  “Successful implementation of that plan always comes down to the right timing for the plan, the products, and the internet users. Take a typical restaurant, for example, that changes hands multiple times before it becomes a success.  Each person who previously owned it went out of business. Then one guy takes over and before you know it there is a line out the door and it is the hottest place in town to eat.  Domaining is like that.  You may have the same idea but you have to wait to execute it at a better time or in a better way in order to achieve better results.”

With Google and ICANN’s revised policies on the 5 day grace period, domainers must give more serious consideration to the domains they purchase—or waste a lot more money dumping those they don’t want.  With growing intolerance for ads consumers don’t want to see, domainers require more than parked pages and arbitrary click-throughs to get customers to their sites.

 “These Google and ICANN decisions are the best thing that happened to the domain industry, said Schwartz.  “I expect they will accelerate the domaining industry in new ways, thanks to changes imposed on the methods used to buy and sell domain real estate. Now that the party is over and everyone has to work harder to make money, people can do two things:  keep doing what they have been doing and go out of business, or search for new, more effective solutions.”

Schwartz advises domainers to buy descriptive domain names that automatically drive traffic to the site. Miller agrees and encourages domainers to acquire niche industry domains with generic names and create a business or socially relevant information portal that attract Fortune 500 companies to want to acquire the site.  Mike ‘Zappy’ Zapolin and Andrew Miller--the people behind http://www.internetrealestate.com/  are good examples of people who built a business and brand around the term Internet Real Estate as well as other online brands such as software.com, podcast.com, chocolate.com, etc.  

“Parking pages may start with a Google ad feed, but domainers need to take it a step further,” said Miller. “The domain industry is a haven for entrepreneurs with many more opportunities than some realize.  Successful domaining is no longer about having parking pages or lists of links on a page. It is about having real content, compelling information, and the most relevant advertisers.”

Domainers should take advantage of digital, video, software, and hardware solutions to create more compelling advertising and messaging on their own sites. They can also create or host blogs, community networking, and niche-specific sites to attract visitors to help disseminate their messages and ads.

“All these events are exciting evidence that domaining is a thriving, growing, and changing industry,” said Miller.  “Change stimulates thought, and my advice to domainers is don’t settle. Push yourself and figure out ways to make your domains work harder for you to maximize your revenue opportunities.  A tremendous amount of growth and opportunity is still ahead.”