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March 16, 2007

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» Search Engine Arbitrage - Pros and Cons from DomainTools Blog
Search Engine Arbitrage is defined as buying ads from a search engine and then selling ads at a higher price. For example the arbitrager buys the term rare dirty coin at Google and pays $0.05 for the ad because no one else is advertising ... [Read More]

» Web 2.0 Sparkle, SEM and Arbitrage from GetDomains .info
Great article about domain and traffic marketing by Frank Shilling: After the dot-com bust I was on Grand Cayman trying build a new overseas gaming business.. We were having a lot of trouble and were seriously thinking about returning home to get back... [Read More]

Comments

Sahar Sarid

This is an excellent post Franky with lots of good points. I honestly don't know which is a better business model. I like arbitrage scalability while I like domain sustainability.
Can I choose both? :)

***FS*** I think that is the answer Sahar.. just have what they're having.

Omar

Frank,

Very interesting story. I understand your point that investors are looking for business opportunities that can scale and that traffic arbitrage can potentially be one such opportunity. However, historically arbitrage opportunities have not lasted long. In addition margins can compress rather quickly as you pointed out.

When looking down the road, do you see the domain industry being a stand alone industry or do you think we’ll merge into other areas and ultimately be in the “online media” category?

***FS*** I think it will merge. We all need to evelve in technology .. embrace it.. But build a fallback position in case the mania unwinds. Thats what the names are.. They are the burndown. Have them and you get a re-do.

Eric D

Ouch! – Et Tu Brut!

I hear ya and I agree with you – Arbitrage is a model that can be replicated and thereby others can come in without a strategic domain. Nothing beats a great domain name for type in traffic – if you own it and its paid for then it is just like prime real estate. What I find interesting is I am pretty sure I know who you were meeting with and he is a friend of yours, (starts with a [X]), so you definitely call it as you see it – even with friends.

Cheers,

Eric
P.S. You have been posting so many great posts in the past week – thank you so much – you have inspired me to with my own completely unrelated business and I am sure you are giving countless others the extra drive to follow their dreams as well – so Thanks you are a breath of fresh entrepreneurial air.

**FS*** Thanks for your kind words Eric, I read this twice and really don't see the OUCH.. what's so bad about accurately illustrating what's going on around us. I've got to say my statement is no judgement on an individuals biz.. This is me taking a giant step back - looking at where we are now. Thinking about where we came from and pointing out the 5000 lb elephant in the room that nobody seems to want to talk about. I asked a friend of mine who recently attended TRAFFIC what was the undercurrent of the show. He said: "Arbitrage..Everybody is getting into arbitrage". I do not think arbitrage is going away. I do not think the big arbitrageurs are going away. And if arbitrage is what WallStreet wants, I can guarantee you that this time next year I am going to be spending 10 million a month buying traffic. :)

Rick Schwartz

12 years into the game and they are still jumping on windmills. They would rather buy a bag of smoke than STOP and THINK. Like you said, you can pull the plug out of a domain for any amount of time you like and plug it back in and those visitors will still be there. A gushing oil well with no end regardless of what you do and what others say.

I feel the frustration building Franky. How is it possible for them to not see, understand and embrace something so simple?? Simple with a 12 year track record. That has given birth to a multi-billion dollar industry. Yet embrace a house of cards that can come crashing down at any moment for a multitude of reasons and not in their control? How is this possible? And folks still trust the stock market?? Are you kidding? LOOK WHO is in charge and making the decisions. Their short term gain is our long term loss.

The best revenge is doing well and letting them know they are clueless. Their breed will die and be washed away and when their carcasses show up on the beach, their replacement will just be shaking their heads and say.... "MORONS!"

***FS*** You and I have great lives Rick .. We don't need somebody to stroke us and tell us we're good.. This is not so much frustration as incredulousness. I am just struck by the kookyness of it. It feels so hollow. Well, I'm a big boy: . If you can't beatem joinem. Wanna start an arbitage business? :)

Eric D

Frank – I guess the “OUCH” part comes from I know how hard your friend worked to get where he is at and the risk he took - at 2 a.m. it seemed as if you were minimizing that part of his success. That being said, you are right on second read your post is not criticizing him or taking anything away from him at all - more calling a spade a spade about how dim witted investors can be when it comes to something as obvious as owning a portfolio of awesome domains.

I think the biggest hurdle that people have is that they do not see how a great domain is exactly the same as a great piece of land. For many the .com extension seems like an arbitrary TLD and when a new TLD comes along land value will go down. But as you mentioned there have been Billions spent advertising the .com phenomenon – and so “Shoes.com” will always get highly targeted traffic – today – tomorrow and for years to come.

This is what fascinates me the most about the Internet – I got involved when Marc Andreessen was pumping out a new version of Mosaic once a week – at that time I was blown away by the opportunity. The amazing thing is that the market of users keeps getting bigger and bigger and opportunities are growing as well. When I read that you do not sell your domains, at first I was shocked and then it hit me – why would you sell an acre of downtown Manhattan if you did not need to? A great domain is a money making machine and as long as you own that machine you will continue to make money.

Cheers,

Eric

***FS*** That is a great point Eric (you too are a pretty clever guy).. And you're right. Folks have worked very very hard building their businesses. Then again there are Countries witrh poeople working very hard in coal mines for twenty cents a day.. we're all going to the same place one day -- and for the record I have several friends who engage in SEarbitrage for a majority of their income. Here's what troubles me. When I talk to these guys and others about the space, nobody 'really' wants me to use the word 'arbitrage'. One said to me: " I call it traffic marketing" .. another said.. "we're calling it SEM" and none of them (not a one) wants to talk about it publicly. To the public it's only about the domains which miraculously get all this traffic because they are 'good' names or because of their 'excellent content'.. that's just not true. Sometimes they are not good. The content is often regurgitated or made up fast specifically for getting past the SE's sniff test.. They get 'traffic' because that traffic is bought and paid for. I can stomach anybody generating more revenue than me. But when they say they are in the "same business as me" and they are really not (but the analysts believe it to be so).. And then they don't want to tell anybody their 'little secret' That's when I think its incumbent on me to 'call a spade a spade'.

Michael Feeley

There is no doubt in my mind whatsoever that the "domain industry" will end up being blended into “online media”. It absolutely will happen. In fact I believe that it's only a year or two away from a consolidation point of view. The fact that the vast majority of the industry's income comes from a media company (Yahoo/Google - it is what they are) really says that we are already there.

Tia Wood

What about generic typos? Obviously typos of trademarked and branded names eventually die off, but what about typos of generics?

***FS*** Typos of generics and typos of tm are the same .. Yahooo.com <-- three o's will get traffic as long as the correct spelling does.

Raymond Hackney

First off Frank I think your article here is the best written for anyone interested in Domains,Seo,Traffic that I have read in a long time. Everyone should read it or they are behind in this game. Excellent job.

Do you see arbitrage going way with spreads like your example buy .30 sell $1.50 that is a great spread. My background is the financial markets and have played some small arbitrage on announced takeovers. But you would not be getting this type of spread % wise.

Secondly why wouldn't "You" do this too you could certainly make alot and you have the domains to fall back on.

I think the biggest thing you talked about with regard to the manin calming down is you have the domains to fall back on like your RUMCAKES.com example if the metrics get screwy, ppc lags and valuations get tighter you just develop businesses from these generic .com domains and evolve to a new entrepreneur

Lastly do you think Arbitrage can work for the little guy who cannot afford $$,$$$ .coms? I mean it may be lower than your interest level but for someone to be able to make $3,000 to $5,000 a month is better than working in a coal mine IMO

Maybe the next T.R.A.F.F.I.C. should do a session on Arbitrage the plusses and minuses of this type of traffic strategy

***FS*** Thanks for the compliment.. In spite of the fact that anyone can do arbitrage, it thrives because not everyone does.. people are copmplacent or lazy or have no interest, so spreads are not as compact as they should be. I think the TRAFFIC conference brainstorm idea is great. I am going to gingerly start with arbitrage (although it runs counter to my instincts). I think anyone who can build/host a website can begin in arbitrage. At the risk of sounding like Don Lapree .. this is just buying and selling. Anyone can do that. Domainers make the best arbitrageurs because they have 50-75% of the arbitrage network anyway. By our nature, we own a network of names and have websites and we have a deal to sell traffic. Now all I need to do is buy the traffic cheaper than we can sell it and add content. Some of the spreads are more compacted than that but hey.. who cares.. If you can make even 5% a month that's free money!! I do think this would be a great way for smaller domainers to get a toehold.. take a name that gets type-in traffic, recreate the page to add content and then start buying traffic. Its not that easy.. there are rules you will run into on the buy/sell side.. but this is a good opportunity for folks.

William Brister

Frank,

Isn't the only real difference between natural type-in traffic and bought arbitrage traffic is the level of ignorance in the person searching?

William

***FS*** nope.. not all ignorant people are created equal. Type in a name.. bam you get paid-listings. That's the user experience. Arbitrageurs often buy traffic on less potent keywords so the user experience is: Type: "free psychic readings" at google, click on listing taking you to arbitrageurs psychic website, where you get 'more paid search listings', this time for the more valuable term "Psychic" .. what happened is the cheaper traffic for "free psychic readings" got laundered into "psychic" and [stands to reason] the 'extra layer' of paid search listings on top of another layer of search listings, dilutes user potency. Now if the keyword markets say this is okay, I'm all for it.. in fact you should set up a site. The rules are the rules and I'm not going to gripe about them.

Salman

Frank, I see your points and yes many people are not 'getting it'. At the same time, for those of us who cannot afford to purchase a network of typins (or even a single killer generic domain) what are they to do?

Yes I agree for companies that spend millions on advertising already, they should seriously consider a nice generic domain, but for the majority online marketings/arbi's/seo's etc they have no other choice but to buycars101.com it!

***FS*** More power to them I guess.. I have some great acquaintances who make a pretty good living doing that. I just think it's important to understand the downside before putting grandma's life savings in their stock.

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