Domain company reports sharp drop in domain parking revenue.
Domain name portfolio holder, registrar, and parking company Dark Blue Sea today reported a massive drop in parking revenue compared to last quarter. The company generated $1,370,000 from parking its own portfolio, down from $1,661,000 last quarter. That’s an 18% drop in just one quarter. A year ago in the same quarter the company pulled in $1,949,000 from parking its own portfolio of domain names.
Customers using its Fabulous domain parking service earned about $3,000,000 in revenue last quarter after DBS took its 26% cut.
The company blames overall economic conditions, increasing transparency of PPC advertising, and the collapse of advertising arbitrage for the drop in domain revenue. Below is an excerpt from its report (emphasis added):
Industry analysts are now concerned about the cyclical exposure of the US online advertising industry to an economic downturn. Whilst online advertising is still one of the most cost effective methods of advertising, it is also one of the easiest to cancel. And cancelled online advertising can lead to immediate impacts through the keyword auction and Coverage, Relevancy, Quality, Price mechanisms outlined above.
Over the last four or five months, the Company has observed a general reduction in the ad spend of a number of large advertisers that have historically purchased the Company’s direct navigation traffic. We have observed this through a partial reduction in price but more significantly through a decrease in Click through rate. This reduction in these advertisers appears to be partly due to the weaker economic environment but is also linked to some significant structural changes that the Search Ad Networks have been making.
Attracting major brand advertisers is a very important strategic initiative for the Search Ad Networks. In an effort to attract these brand advertisers, the Search Ad Networks have tried to make the process of advertising less opaque. In particular, they have given advertisers more flexibility (opt-in and out-out) on which websites their advertisements appear – a very important issue for brand advertisers. This has led to some advertisers opting out of appearing on direct navigation websites.
This is a great analysis of what we’re seeing in the industry right now, and it comes from a company with plenty of data to back it up. Perhaps the most interesting insight is how easy it is to cancel online advertising. Although online advertising is easy to track and calculate an ROI (something people want during a recession), much of it can be canceled with the click of a button. TV, radio, and print ads are often contracted for far in advance.
The silver lining? DBS sold $1,003,000 worth of domains last quarter. That’s down from the prior quarter but up 3x from the same quarter last year, and its agreement with GoDaddy should boost sales over the next quarter.