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Prediction: Internet Traffic Will Help Lift the Domain Sales Aftermarket

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I’ve heard about a lot of top producing domain names being moved to InternetTraffic.com in the last couple of weeks, and I’ve read reports and heard from others who say that the revenue increase is pretty astounding. I’ve also heard from others that believe there’s a good chance smart pricing will lower some of those initial great results.

Should the revenue stay steady for those who are parking their names there, and even if they see a slight drop in revenue, I predict we are going to see a nice uptick in the domain aftermarket in the second half of 2011.

My business first blossomed back in 2006-07. That’s when I started focusing on buying and selling higher end domain names, and while I sold mostly to domain investors, the sales were solid. PPC was strong, and people used the proceeds from their earnings to re-invest in quality domain names. The PPC bubble started bursting in 2008 and bottomed out in 2009, and the domain aftermarket deflated along with much of the economy.

If InternetTraffic.com continues to produce higher revenues, domain investors will likely start looking for good quality investments in the domain space. Physical real estate can be a pain in the ass to deal with, and that market is still reeling. I am sure many are going to build up a solid cash reserve because they know its importance, but once that is done, I think people will begin reinvesting in domain name assets, as they did before.

I think NameJet is going to be one of the primary beneficiaries of this new income, since many of these names produce revenue right off the bat. I predict we’ll begin seeing a trend of higher sales and greater sales volume as people at the top of the chain begin taking chances on names they weren’t willing to touch in the past 18-24 months.

I also believe we are going to see higher end user sales. One of the main reasons we began to see a concerted effort to sell top quality domain names owned by the most successful domain investors was that they were using it as a steady revenue stream. Some great names don’t make much PPC revenue, so it makes sense to sell them if the price was right at the time, and it could help offset PPC losses. With PPC gains, there’s less motivation to sell, and consequently, higher asking prices.

It’s very difficult to predict future behavior of domain investors. I could be way off base, and these investors will simply keep the extra cash as a security blanket in the event of another PPC crash. Smart pricing could hurt the revenue these names are generating and the excitement could be deflated.  I really don’t know for sure.

I am inclined to believe that if revenue is returning to where it once was, we will begin to see some nice acquisitions and a general lift in the domain aftermarket.


About The Author: Elliot Silver is an Internet entrepreneur and publisher of DomainInvesting.com. Elliot is also the founder and President of Top Notch Domains, LLC, a company that has sold seven figures worth of domain names in the last five years. Please read the DomainInvesting.com Terms of Use page for additional information about the publisher, website comment policy, disclosures, and conflicts of interest.


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Comments (14)

    AB

    Elliot…what does Rick mean when talking about reall traffic VS. fake/phantom traffic

    (Since this is a question about Rick’s statement, I’ll understand if you prefer not to comment on it but I’m just curious)

    May 26th, 2011 at 10:32 am

    Elliot Silver

    @ AB

    One thing I never like to do is interpret what other people mean, so take this with a large grain of salt. I assume he means:

    – Real traffic is great direct navigation names, where someone looking for a hotel in Boracay would type in BoracayHotels.com to find the hotel, and when they click on the links, it’s legitimate, highly qualified traffic.

    – Phantom/fake traffic could be click fraud perpetuated on crappy names where nobody would type in shhsydyfdofls.info, so any clicks and traffic to a name like that would almost positively be fake. As a result, the advertiser gets screwed (but has to pay). It could also be forwarded traffic from irrelevant domain names and the people had no intention of landing on the page they ended up.

    May 26th, 2011 at 10:35 am

    AB

    Thanks, that’s what I figured. But I’m just trying to imagine where this fake traffic is coming from.

    Are parking companies doing it to a) get $$$ from the advertisers and b) pad the traffic numbers to the domain owner to trick the domain owner into thinking parking is a great solution?

    I mention parking companies specifically, because I don’t see why an advertiser or 3rd party would commit click-fraud, because they wouldn’t see any money from it. And it teh advertiser’s case, they’d be losing money

    (again, these questions stem from Rick’s post, so feel free to ignore :) )

    May 26th, 2011 at 10:49 am

    M

    My interpretation of Rick’s real v. fake traffic is what eliot said but also that it isn’t necessarily “fake” in the literal sense, but just not perfectly targeted. Type-in traffic is exact, and the person ending up there meant to go there and is most likely to convert.

    So even legitimate search engine traffic could be “fake” because search engines are nothing more than code and make mistakes. Sometimes the best result for a website still may not be that relevant, so in that sense it’s not converting and still “fake” compared/relative to direct typeins. So type-in is the gold standard, everything else is artificial or “fake”.

    My 2 cents/interpretation

    May 26th, 2011 at 11:35 am

    Shane

    I think it will be work in two ways. Since they have a better way to monetize the names, InternetTraffic members will be willing to pay more. At the same time I think you’ll see some names dumped that aren’t producing. It’s nice to be on the inside :)

    As for Rick. I think he meant type ins. And on a final note, there sure is a hell of a lot of adult/porn names moving to IT. I didn’t even know some of those things were physically possible that they describe in the names.

    May 26th, 2011 at 11:43 am

    Andrew

    I’d love to see parking return to the glory days. But I don’t see it happening.

    Remember some of the changes that have occurred since then:

    1. Advertisers can opt out of the parking channel
    2. Smart pricing has expanded across the board, and parking clicks have been smart priced down (regardless of if it’s “good” or “bad” quality traffic).

    So Frank is using a Google feed. Given his number of domains, he probably has a typical % payout from Google. If he pays a higher % of his take to these domainers, then they may pocket 5%-10% more than they’re getting from their current parking company.

    The math just doesn’t add up.

    The key will be to look at this 3 months down the road after smart pricing really kicks in and clients get their first “clawbacks” (ask any DomainSponsor customer about those!).

    Also keep in mind that a lot of the people buying domain names back then owned parking companies :)

    Just my thoughts…

    May 26th, 2011 at 12:11 pm

    Elliot Silver

    @ Andrew

    The numbers I am hearing now range from 40-100% lift. Smart pricing may kick in down the road, but if it doesn’t ding most people too much, there will be more money available for investments.

    May 26th, 2011 at 12:15 pm

    LS Morgan

    InternetTraffic is a small and highly selective group of top performing domain parkers and resale speculators.

    I really don’t see the rise in click values with InternetTraffic having much meaningful impact on broader domain sale prices, save for maybe inspiring that same small and highly selective group of top performing domain parkers and resale speculators to open their wallets a bit wider when acquiring premier web properties… but really, when was the last time they (the usually suspects at the top of domainer mountain) were in acquisition mode on the high end of the market?

    If anything, it appears they’re heading in the other direction- selling.

    Unless InternetTraffic.com opens the doors wider and puts the squeeze on the entire parking industry- which would bring a lot more money to the table in terms of people willing to spend more on traffic names- I don’t see this one thing changing much.

    May 26th, 2011 at 12:42 pm

    Elliot Silver

    @ LS

    I know it’s a small group, but this group were some of the most active people when it came to domain acquisitions, and if they have millions of dollars in additional revenues, I would bet they’ll reinvest.

    May 26th, 2011 at 12:44 pm

    LS Morgan

    I think the domain market (and particularly, the costs associated with acquiring traffic domains) has gotten a lot more efficient than it was back when they were in acquisition mode. Exploiting that inefficiency during that one place in time is what allowed to earn the income that put them where they are today.

    There might be occasional crumbs left, in terms of higher end domains for sale at a reasonable enough parking multiple that buying them to park and wait for an end user offers a favorable risk profile- and if anyone is going to be able to spot those domains, yes, it’s going to be guys like Berkens, Schilling, Schwartz, etc- but for the most part, the value drivers in the keyword domain market today have nothing to do with how well they perform parked.

    Great for guys who bought them all up for registry fee, but the math isn’t quite the same in the year 2011 when those same names now sell for tens or hundreds of thousands of dollars.

    May 26th, 2011 at 12:58 pm

    Elliot Silver

    “Great for guys who bought them all up for registry fee, but the math isn’t quite the same in the year 2011 when those same names now sell for tens or hundreds of thousands of dollars.”

    @ LS

    I don’t think the sales have to be high performing PPC assets. They can be good values in terms of name value alone. I’ve only sold one name (maybe two) based on any type of revenue multiple.

    BTW, I started in 2003 and most of my biggest sales today are names I picked up in the last month – not reg fee names I’ve been holding onto for years.

    May 26th, 2011 at 1:01 pm

    LS Morgan

    I guess a more succinct way to put it is this.

    Earning TWO nickles per click rather than ONE nickle per click is a very big deal when your cost to acquire was $7 and your recurring cost basis is $7.

    Everything changes when your cost to acquire suddenly becomes $7,000, or $70,000 or $700,000 for that same domain. How relevant is “parking” now?

    May 26th, 2011 at 1:03 pm

    Tron

    Phantom Traffic = Arbitrage traffic

    May 26th, 2011 at 2:02 pm

    RK

    Btw, it appear Frank is also going to provide domain sale system/links on pages.

    :)

    May 26th, 2011 at 7:16 pm

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