Quote: "The vast majority of visitors are the Internet equivalent of the television generation's couch potatoes -- voyeurs who like to watch rather than create."
This quote is so bang on accurate.
Too many developers enter the Web 2.0 dream with stars in their eyes. The biggest challenge with "user generated content" is offering something compelling enough to get users to participate. A good Web 2.0 site is the difference between an entertainer who can get the crowd to their feet and a lounge act in Vegas that motivates that crowd to order a second drink and hit the tables rather than heading to a competing casino. In Vegas you have the luxury of getting the crowd drunk. Not so much on the Web.
Google gets the crowd to leap to their feet (stone cold sober) and come back for more with a search-algo that hits it out of the park with every search. What can you do? What can I do to implement and execute with the tools we have in a way that moves the masses? The answer to that question is the difference between Domain 1.0 and Domain 2.0.
Paid search coupled with domain names has historically been the Domain 1.0 fix. "Hate it or love it the dog's on top", 50cent wrote.. and domains have been that dog, driving paid search in a benign, inert manner since the dawn of the commercial Internet. In 1999 Goto.com rolled out a pay-per-click advertising implementation and a few early domainers capitalized on that implementation with sites that mated targeted results with the subject matter that the name describes. How good were these early implementations? It took until late 2005 and a Paul Sloan article until everyone said "Hey.. wait a minute! That's too easy!" and started to jawbone faults with the implementation. So today, 8 years after domain owners began making money through paid search, very little is different.
It's been my experience that lightning bulb moments on the Internet, prove their concept in the first moments. Even in the earliest days, pay per click advertising was 'immediately' so much better than the previous CPM, RON display ad alternative.. You could move all kinds of traffic to a paid search network and monetize most searches in a more effective (higher margin) way; and much more elegantly than stuffing web-pages full of banner ads.
I have seen perhaps one such watershed since. No video advertising, no CPA, no pay per call, nothing has had the "Wow, this is different" effect like PPC. Arbitrage is the only thing that comes close.
The Internet was built on Arbitrage. Buying type in visits from a domain name owner or third-party site in order to inflate the purchaser's traffic numbers. That's the cornerstone of the commercial Internet. Look at the top 50 US websites. They are all engaged in arbitrage of one kind or another. Very few can naturally marshal millions of return visits out of thin air (nod to IRS.gov, MSN Error search). The vast majority of all websites has to 'advertise' to get people to the door. For domain owners, buying their names as keywords from the search engines may give their revenues that unexpected pop which they used to get for free.
So here we are again, you have some domain folks who have not bought a significant domain name since 2000 (making more money through paid search than ever). You have others who have rolled up thousands of sites doing very well. Still others have sold out completely to new ventures who hope to create user generated content (which will motivate the masses to contribute) and others still, breaking big portfolios down through a combination of paid search and selling the very domain names they bought in bulk.
Like a technical agnostic, I stand here wondering.. Is this all there is? Is there nothing on the other side? No Domain 2.0 magic ready to take us all away to the promised land?
I hypothesize that the difference is what we know. We all know that there is a bare din level of person-visit that comes to generic domain names for nothing more than the keyword weight or gravity of the domain names themselves. These visits have nothing to do with cybersquatting, former sites or misleading.. if you own a generic name like MuffinRecipes.com or Sailboats.net some people will type that name just because they are curious about the subject matter and the ".com, net etc " which are powerful extensions for drawing type-in visitors. These folks want to explore the Web, not just the top 20 results they can find on the first two pages of most search engines. People type the names to explore for something new related to the subject they are interested in. That single attribute, that characteristic of domain names will continue to bring people to the domainer's doorstep long after I turn to dust. Own the websites and control that navigation.
How do we implement and execute beyond a page of PPC listings? I have not yet found a better formula to make more money. Perhaps the better formula is raising prices. We all know that advertisers are willing and able to pay more for quality traffic than they presently are. While arbitrageurs cry the blues on Webmasterworld that "PPC prices are too high", the average real business bidders are cooing about the smokin' deal that PPC ads represent over traditional media. Nobody ever posts when they are getting a super deal, lest the competition move in. So one challenge is finding a way to convince non keyword arbitraging bidders to open their hearts, minds and wallets further for exactly the same traffic; traffic they have been getting way too cheap for too long.. Another challenge lies with the domain owner. Domain registrants of all shapes and colors need to execute better to provide more useful, targeted PPC pages - some of that being provided by the upstream PPC partner. I am talking about more targeted, better versions of what we have now. A delivery of advertising that makes folks say, 'Wow'.
If there is another better implementation it is with us now, overlooked or ignored in some small booth at the Web 2.0 conference; like Speilberg's 'Ark of the Covenant' in some undiscovered crate in a government warehouse. In the mean time, raised prices for ads, facilitated through something like Sendori.com's pay per unique or ad rate minimums through YHOO/GOOG; fully developed verticals and arbitrage. A combination of those four. That's what we know for sure. That is the way in 2007. Web 2.0, Ajax and Ruby don't drive more sales .. better mousetraps drive more sales. I have not seen a revolutionary new domain name implementation mousetrap beyond what is generally known. Those four and larger versions of those 4 are what moves the needle.. In the mean time, keep consolidating, getting bigger and looking for the Ark.
Frank,
Another well thought out and written article no doubt but I think there is one thing that is better for domains than PPC and that is development.
Think about it. PPC revenue ultimately has a ceiling of income. Granted it is a rising ceiling but none the less, the ceiling on PPC revenue is determined by the quantity of advertisers and their bids for keywords.
There is really nothing "entrepreneurial" about parking domains with PPC ads so there is no $1.6 Billion deal waiting to happen on a domain.
Imagine if you developed all of your domains. Sure it would take an army of people and a cruise ship full of cash but how many multi-million dollar domains/websites would you have then?
Development may not trump PPC revenue every time but at least a developed site has the potential to bring in more traffic and revenue then just the type in traffic and PPC revenue.
Also, one last thing and I hope this doesn't sound crass but PPC sites really contribute nothing to the end user's experience of the Internet. People don't really learn anything from PPC sites other than maybe where they can buy the product or service they are seeking.
***FS*** Thanks kindly Rob.. you make a teriffic point.. but I would argue that PPC has a gwenerational leap forward and has added a great deal reinforce navigation paterns.. Give the people relevant listings related to the subject matter they are looking for. In most cases those results are powered by Google so they are more relevant than not. Take away PPC and you have pages filled with a bunch of banners for casinos and viagra.. or worse.. the network solutions stickman and shovel under construction page. So while we disagree on your last paragraph, we agree that dev of one kind or another is the highest and best use.. I just haven't found the tools to quickly roll it out across thousands of sites yet.
Posted by: Rob Sequin | April 18, 2007 at 09:41 AM
Frank: "I just haven't found the tools to quickly roll it out across thousands of sites yet."
Perhaps it is a myriad of tools in the hands and minds of humans that work with you.
***FS*** Good thinking :)
Posted by: josh/Swerve | April 18, 2007 at 11:17 AM
Here's something to consider... you can find high-quality, experienced writers who will work for around the $100-$150 per 500 word article (you can also get cheap writers offshored in various places for 10% of that).
Hire a few freelance editors to liaise with the writers and keep the story ideas flowing and the resultant articles formatted and ready for publication and you could be rolling out "real" sites with hundreds of unique, well-written, professional articles for perhaps $25-50K per site. Add a unique, validating, cleanly coded, professional-looking template and logo (another $2K or so) and you're basically "there" with a totally credible, real site. For a tip-top domain name, that might not be much of an investment, I don't know.
Equally, you could probably spend a similar amount (or less, or much less) on online tools to add to domains that lend themselves naturally to such tools (an example might be a range of mortgage calculators on a domain such as mortgagecalculators.com)
Basically, "real" development need not cost the $millions that VC firms are dumping into the Web 2.0 style companies if you already have a domain that brings in the traffic that the aforesaid companies are going to have to advertise for, one (expensive) visitor at a time.
If you have hundreds or thousands of daily visitors at your disposal, and you give them on-target, useful tools and information, the promotion basically takes care of itself as some % of your visitors will blog about the site, link to it, add it to their social bookmarking tools and so on.
Posted by: Edwin | April 18, 2007 at 07:29 PM
Arbitrage is just cheating on advertisers and is causing that bids for content pages are lower. For example: I have keywords which converts well for me, keywords which does not convert so well on which I bid less and keywords which does not convert at all which I block. Now some "arbitrage" guy buys those non-converting keywords for cheap, and "arbitrage" these non-valuable visitors on his page into a converting keyword click. But the visitor is STILL SAME, that means it still will NOT convert for advertiser. Arbitragers are trying to transform shit into gold (excuse my french).
***FS*** I agree with some of your sentiment here.. there is "garbitrage" (shoveling bad traffic to to good phrases) and there is arbitrage (taking keyword: 'shopping' where advertisers pay 30 cents a clcik and moving them to keyword 'shopping' (exact match) on another network for $1.00 a click). If arbitrage went away I would be content as a clam, because domain owners 'own' real traffic. But so long as the keyword-marketplaces (YHOO/GOOG) permit the practice, you would be remiss not to participate.
Posted by: TMfor | April 18, 2007 at 11:45 PM
Re: Arbitrage
The example $0.30 versus $1.00 for same keyword would not be effective. While arbitrage between stock markets is 100% efficient (minus brokerage fees) keyword arbitrage depends on click rate on the arbitragers page. In this example you would need click rate 30% to break even, which is already quite high for content page.
Posted by: TMfor | April 19, 2007 at 12:54 AM
Your blog is outstanding. I come here every day. You deliver real value with most of your posts.
I am not sure how many people give you feedback, but there you have mine.
I have been blogging for a long time, although my blog is totally different, and I think it is always nice to get some feedback...
Many of the subjects you talk about are interesting, and your approach is also informative, yet fresh. Your links are alsu usually worth a look.
When I read blogs like yours I fully appreciate the power of the internet.
And the "effort" of people like you who keep posting for everyone's benefit.
It is hard to find the good quality stuff on the internet (and I read a lot)
Your blog is one of the best things I've found so far, for a long time...
Congratulations
Regards
Javier Marti
http://trendirama.com
***FS*** Thanks sincerely!
Posted by: Javier Marti | April 19, 2007 at 09:53 AM