Yahoo! creates floating-minimum-bids system similar to Google Adwords.

Yahoo! (YHOO) has informed its advertisers that it is changing the minimum bid price for search ads on its site. The minimum bid was ten cents; now it will be a floating minimum. This is similar to Google’s (GOOG) system that affixes a minimum bid to your keywords depending on the quality of the ad text, keyword selection, and your landing page.

If there’s one thing advertisers don’t like, it’s lack on transparency on how they are being charged for ads. Google’s current system and Yahoo’s new system certainly lack transparancy. Ask any Google advertiser what they hate most, and they’ll likely say “I hate creating a targeted ad campaign and then having Google tell me that, because my ads are relevant, my minimum bid is $5.00 per click.” Or “I hate how my click price averages 50 cents one day and 90 cents the next. Why?”

Here’s a little background. Pay-per-click search ads originated with GoTo.com. It had a strict “bid for position” system. If you bid 25 cents for your ad and someone else bid 24 cents, you would be the first ad on the page. After a while, Google adopted this system and realized that it didn’t maximize profit. To maximize profit, the search engines have to consider the click through rates of the ads. For example, if your competitor’s 24 cent ad gets twice as many click throughs as yours, then it should show up above your 25 cent ad because the search engine will make more money. This is fair and easy to understand for advertisers: it’s transparent.

Then came the “black box”. This black box apparently takes into consideration your ad text, the keywords you choose, and the “quality” and “relevancy” of the page you send clicks to. Google provides general guidelines, but they’re tough for the average joe (and even sophisticated advertisers) to figure out. Ranking high in Google Adwords is almost as difficult as ranking high in Google’s organic search results. The end result is lack of transparency.

Compounding matters is that the search engine’s black boxes just don’t work. They flag ads as “bad” or “irrelevant” that are very relevant, while allowing pages full of ads to float to the top. Here’s a recent case in point with Microsoft AdCenter. I have an ad campaign for a music site that their automated review system flagged as both an “adult entertainment” site and as being related to alcohol. Why alcohol? Apparently by including the line “CC required” in my ad to indicate a credit card was required, the system picked it up as “Canadian Club”, and alcohol. The manual review process for flagged ads can take literally weeks at both Microsoft (MSFT) and Google.

Will these changes at Yahoo affect domain parking companies that use its feed (such as Parked.com and Active Audience)? Content bids will remain a minimum of 10 cents, but I believe many parking companies actually use Yahoo’s search feed. If this is the case, and Yahoo’s magical black box actually increases profit for the mothership, then hopefully this will be passed along to parking companies.

We’ll see about that.

Technology could be crucial to registrars and parking companies.

GoDaddy has filed a patent for a technology that would filter ads from domain names containing trademarks. Patent application #20080033822 reads:

invention allow for filtering online advertisements containing third-party trademarks. In an example embodiment, a webpage host may host a webpage that resolves from a domain name. A check trademark service may parse the domain name into a keyword that an advertising generator may use to generate an advertisement relevant to the keyword. Before the advertisement is generated, however, the check trademark service may download a list of registered trademarks from a trademark database into local storage and determine whether the subject keyword is trademarked by searching the downloaded list of trademarks for the keyword. If the keyword is present, the process may end. Otherwise, the advertising service may generate an advertisement for publication on the webpage. This process may be repeated if the domain name is parsed into more than one keyword.

This is an important technology for domain registrars and parking companies. While big companies goes after small time domainers who hold trademark typos, domain registrars shows ads on thousands of trademark domains registered by their customers. This opens registrars up to trademark infringement lawsuits.

The question remains as to if GoDaddy has invented this technology or is just filing a patent for an ideal solution. The company currently shows its ads on a number of trademark domains. It also auctions expired domains including trademarks, which presumably this technology could eliminate. For example, here are some expired domains GoDaddy is auctioning. The parked pages on these domains include ads:

AmericanMicrosoft.com
WalgreenInfo.com
mach3blades.com
CokeBrands.com
Verizonwimax.net

There are lots of parked domains out there. So I’m going to use them in this article to disguise a commentary that really has nothing to do with domain names.

It’s election year in the United States. That means countless commercials promising a “better America” and lots of political pandering to the masses.

The state of America isn’t so grand right now. There’s talk of recession and the stock market has plunged over the past 2 months. There’s a mortgage crisis because too many people took out house loans they can’t afford and now want to blame someone else. The national debt is over 9 trillion dollars and it’s growing at nearly $1.6 billion a day because the government continues to spend taxpayer’s money and find a way to pay for it later. After all, that’s what gets politicians elected.

In a few months, the government will send welfare checks (disguised as “tax rebates”) to millions of Americans. It’s called “fiscal stimulus”, but it’s really an election year attempt to win voters. Imagine the politican who voted against giving free money to citizens! It’s really just a loan, since someone will have to pay it back eventually (my generation) and the government is already running a deficit. This sort of “spend what you don’t have” government philosophy trickles down to the masses.

Right now the presidential primaries are sweeping the nation. Texas has its primaries (cacauses) in March, and for the first time in a while Texas actually matters. We’ve had Obama and Clinton in town lately, including for a debate last week at The University of Texas. These presidential hopefuls are on unusual turf — trying to sell themselves to Texans. This is unusual because, regardless of which Democrat wins Texas, they’ll lose the state to the Republicans in November.

Whenever you watch a debate, be sure to check the facts afterward on FactCheck.org. Or as Frank Schilling would prefer, FactCheck.com.

The politicians are promising all sorts of things right now. Apparently Clinton wants to turn America into a socialist state by freezing mortgage interest rates for 5 years. That’s brilliant! We may as well void all business contracts and just give stuff away for free. That will instill confidence in our economic system.

Now, for those of you Texans thinking about voting in March, I have a warning for you: regardless of which side you vote with (democrats or republicans), voting in the primary puts you “on the list”. You’ll will be hounded for the next year by the party you voted with. They’ll hound you for money. They’ll call your house to sell you on themselves. They’ll show up at your door. Apparently, voting in a primary is akin to signing up for a spammer’s opt-in e-mail list.

Am I jaded? Sure. I take solace in the fact that whomever is elected president won’t be able to push their crazy ideas through without some checks and balances.

Right??

Guest author Sandy K. Brooks, CPA writes about tax implications for domainers.

[Editors note: Don't look at the calendar...tax day in the U.S. is less than two months away. If you're puzzled about how to treat domains on your tax return, this article by Sandy Brooks, CPA, will help you. Brooks is the author of Domain Tax Guide, which has been updated for 2008.]

When discussing the tax implications of domaining, the first question that is often asked is, “Are domain names property?” Yes, domains are property. Not only have they continually been proven to be property, they should be considered assets. An asset is anything with economic value. The domain name business would not be the successful, growing industry that it is today if domains had no economic value.

Since there is no question that domain names are assets, the next question is what type of assets are they? There has been much speculation about this, and very little guidance from the tax authorities. I believe the type of asset depends on the nature of your domaining business. Domainers can be broken down into three categories:

The first type of domainer is a Domain Developer. You are a domain developer if you build out your domains into e-commerce businesses. Your domains should be considered intellectual property, similar to trademarks, and subject to amortization over fifteen years.

The second type of domainer is a Domain Dealer. If you buy domains with the intention of quickly flipping them for a profit, then you are a domain dealer. Your domains could be considered inventory and expensed as cost of goods sold.

The third type of domainer is a Domain Monetizer, which probably applies to most who consider themselves in the domain business. This occurs when you build a domain portfolio in order to monetize the traffic. In this case, I would consider your domains business assets. Like equipment, your domain names are tools used in the production of revenue and should be depreciated.

These different classifications of domain names each have their own advantages and disadvantages upon the purchase and sale of the domains. How quickly you can write off an expensive domain purchase can have a huge impact on your taxes. Likewise, whether a large domain sale is considered capital gains or ordinary income results in a great difference on your tax bill. There is relatively no IRS guidance on how to classify, report and expense domain names. Research, advanced planning and documentation will help you minimize taxes and maximize your business’ value.

Lawsuit stems from “customer protection measure”.

My prediction has come true: Kabateck Brown Kellner, LLP has filed a class action lawsuit against Network Solutions for its practice of preemptively registering domains names searched for on its site. This issue was uncovered on the DomainState blog in January and set off a media firestorm. On the day the news broke, I wrote:

“If Network Solutions doesn’t stop this practice immediately, they are guaranteed of lawsuit in the near future.”

Kabateck Brown Kellner, LLP issued a press release (posted to the domain community by Domain Name News) today announcing the lawsuit. The suit also names ICANN:

Network Solutions’ scheme is made possible by ICANN. ICANN allows companies that sell domain names to avoid paying registration fees for names cancelled within five days. Thus, Network Solutions can defraud customers at no cost to itself.

ICANN is moving to make its $.20 registration fee non-refundable, which would effectively shut down Network Solutions’ practice. Also, it’s notable that the law firm didn’t sue VeriSign (NASDAQ: VRSN). It’s actually VeriSign that enables this activity by choosing to provide the refund. The .org registry started charging a “restocking fee” that has curtailed domain tasting on .org domains.

I’m sure the law firm didn’t name VeriSign because of that company’s deep pockets.

For more on the Network Solutions fiasco, see Editorial: Where Network Solutions Went Wrong.