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How “Google Direct” May Hurt You in the Long Run

Google Adsense for Domains’ mass-market approach will strain domain name industry.

Almost all of us were surprised today when Google (NASDAQ: GOOG) said it was opening up its Adsense for Domains program. It used to offer domain advertising relationships only to people with massive traffic, then it shut down the application process completely, and now it’s offering it up to anyone with a domain. From talking to a couple sources, it sounds like Google partners were notified of this last week.

To be sure, what Google is offering Adsense account owners is a far cry from the advertising feeds it offers DomainSponsor, Sedo, and Fabulous. But this is a still a major development.

Some of the initial reaction was jubilation. People think that going direct to Google means cutting out the middleman.

I doubt it. Even if there’s some increase in the near term, it allows Google to lower the payouts in the long term. (And a short term increase is doubtful; my tests with the service shows almost all ads are from the content ad feed and quality landing templates are lacking.)

Consider what domain parking companies bring to the picture. First, they bring traffic aggregation. This gives them bargaining power when negotiating payouts with Google. Second, they bring technology that improves earnings and minimizes fraud. There’s a reason DomainSponsor has mathematicians on staff. They’re tweaking everything to maximize earnings. Parking companies have to get the fraud part right because they often times pay earnings to customers before they get their final report from Google.

These benefits cannot be understated.

Now consider what you bring to the table: A little bit of traffic and no technology. If everyone went direct to Google, there would be just as much traffic but no bargaining power and no technology. Whereas parking companies have long term payout contracts with Google, individuals get their payout percentage changed at will.

Soon I’ll be writing about “the Google squeeze” in which Google is able to dial back the revenue share with many of its publishers. It has found a way to do it with parking companies even though they have fixed percentage payouts. By going direct to domain owners, you can expect an even more drastic pullback on payouts.

Is Google doing this to gain bargaining power with the parking companies? Perhaps.

There’s one other angle to consider here. Perhaps Google doesn’t have grand plans. Perhaps it is targeting people that wouldn’t normally qualify to use a domain parking service. Joe Adsense Publisher who has a few spare domains. Google can make money from him. With revenue under pressure, Google is looking for anything to keep the machine going.

But I’m going to bet the company has bigger plans.

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  1. Steve M says

    For the reasons you give, this is nothing more than sparkling fool’s gold for the large majority of–if not all–domainers.

    While most will at least give it a try with a few of their names, it won’t be long before they come running back to the parking co world.

    Me? If and until I hear rants & raves from scores of my domain compatriots (which I’ll be shocked to hear), I’m not going anywhere.

  2. mike says

    What this might do is get parking companies to increase their publishers rev-shares and stop the skimming.

    However once they get this going, whats to stop them from cutting off the parking compaines compeltely.

    Opus Capital is on the phone. they want that oversee.net money back.

  3. Rob Sequin says

    1. Agree. I think they do have bigger plans. They can easily approach some big domain portfolio owners and ask them to come direct to Google. That might be a violation of their contract with a parking company but maybe not.

    2. I don’t understand your comments about the technology part. How does a parking company’s technology help Google? The parking needs technology in order to give good stats to Google, no?

    Isn’t the parking company responsible for it’s traffic to Google? I don’t see how Google is responsible for the traffic that comes to Google from a parking company.

    3. As far as the squeeze… nothing new there. That goes back to the first days of adsense. Google will squeeze and squeeze and if/when Yahoo flops, Google will squeeze more.

    4. I just did a Spanish language domain that I could not monetize well with my current (Yahoo) parking company. I added the domain to Google, set the language to Spanish and then set up the records in my Wild West Domains account. Took maybe five minutes and three minutes was reading the instructions by Google customized for GoDaddy. That was about a half hour ago. The domain is now resolving on Google for Domains in Spanish.

    I can post the domain if requested. I will compare monetization and report back.

    Thanks for all this information.

  4. Mike says

    And… what about companies like Godaddy that steal your money with “Cashparking” service telling you that, after 700$ in earnings, your account has been suspended (with no real motivation)?

    Do you think that Godaddy will give that 700$ back to Google ?

    I think that Google direct is the right responses against thiefs as Godaddy.

  5. Mridul says

    From the technology side, I’m sure Google would provide the technology. Maybe something better than what the parking companies provide. Ultimately it is google that gains more if they improve on the tech side and optimize your domain for more visitors.
    Regarding the payouts, I agree with you. You will see a marked decrease in what they pay you. I only hope they do not take back my earnings at end of the day claiming some fraud.

  6. mike says

    “Perhaps Google doesn’t have grand plans”

    And Perhaps none of us are in the domain biz to make money, we just want to help people find stuff on the internet.

  7. Rob Sequin says

    Here’s is a paragraph from the Google blog:

    “With AdSense for domains, users can find relevant information rather than see empty pages or “page not found” errors. Today we present ads, links, and search results on the pages, and may add other useful information in the future. To ensure positive user experience and the quality of our network, these sites are monitored for policy compliance and prohibited from using text and images designed to confuse users.”

    Read “add other useful information in the future.” That means you can expect youtube videos with ads, Google photo search results with ads, news results with ads. I think Google can give domain owners the option to include all these Google features. WOW!

    Read “and prohibited from using text and images designed to confuse users” means they don’t like what the parking companies are doing by customizing templates and adding photos.

    I now think that Google has BIG plans for AFD.

  8. Jeff says

    Google Adsense payouts have been in decline all year(way over half)and I don’t see them as a credible source of revenue for domain developers in 2009. I will be removing a lot of adsense ads as I continue to develop and discover better ways to monetize visitors.

    This latest move is just another example of some Google Pin Pushing Algorithm cruncher screwing the publisher/domainer to improve the bottom line.

  9. Shai Neubauer says

    I dont think this will hurt us one bit in the long run. It was just a matter of time before Google got into this business. I dont think it will matter much because parking is a dying business anyways.

  10. Ricardo says

    We are sometimes blinded by potential rewards that we don’t recognize the perils.

    In the U.S., we have a plant called the Venus Flytrap.
    It opens wide to invite insects to its colorful leaves, insects hoping to find food or nectar.

    Once it knows the insect is securely inside it immediately closes and feeds off the trapped insect.

    I’m surprised Google doesn’t call the new program – Venus.

  11. Chess says

    Hey,

    I am new to real “domaining”. Please explain why some people would not qualify for domain parking and therefore would seek out google domaining.

    Thanks

  12. Tim Davids says

    the parking companies are who should be shaking in their boots…once goog gets enough domains on board they can squeeze the parking companies and the lower payouts will send the domain owners to goog.

  13. Rob Sequin says

    Interesting business idea Tim.

    First put your suppliers (the parking companies) out of business, get the consumers locked in (domainers) then raise prices (in this case, lower the payouts).

    What company was it that said “Do no evil”?

  14. Chris says

    This article has a great hook. Nice job.

    Let’s assume that an advertiser paid Google $1 for a good commercial click. And that Google typically keeps $.49 of that revenue and passes $.51 on to the publisher (in this case the parking company). The parking company, in turn, keeps 30% of the revenue and passes 70% on to the domain owner. (I’m making up all these numbers — my guess is that, if anything, these estimates are high in terms of what the domain owner earns.)

    So the domain owner earns .7 x $.51 = $.36 from that $1 click.

    Now, let’s say that the domain owner cuts the parking company out of the equation. Are they likely to get more money or less money per click?

    There’s no way to be sure, but by cutting out the middleman, it’s easy to imagine situations where both Google and the domain owner are better off, as there’s now an additional $.15 / click that can be divided between them. Even if Google takes 2/3rds of that, the domain owner should now see $.41 per click, compared to their previous $.36 — a nearly 14% increase in revenue.

    As to comments about the AdSense revenue percentages declining over the past year, I think it has a lot to do with the quality of your traffic. My understanding is that Google still claims to give “a majority” of revenue to publishers. My guess is that “a majority” has meant 51% for quite a few years now….

  15. Andrew says

    @ 3 Rob Sequin – the parking company’s technology optimizes the ads and related keywords place on pages, as well as the propensity of someone to click on them (and hopefully convert). There’s a reason Parked.com has something like 15,000 templates.

    So there are stats that are passed to Google, and stats used in house to improve revenue.

    Hopefully I understood your comment

  16. Andrew says

    @ 12 Chess – Parking companies don’t want to deal with people with low traffic. They also minimize fraud by denying lots of people, especially outside the U.S.

  17. Andrew says

    @ Chris – It’s more along the line of:

    Google pays Parking company 60%-80%
    Parking company pays you 50%-85%

    Parking companies have been paying a greater percentage to customers as the amount paid by Google has decreased.

    With regards to Google paying less for traffic, its traffic acquisition cost has been steadily decreasing.

  18. Henry says

    This is funny! It’s all about “search” and “traffic”. Many of you don’t seem to remember how Google.com started and garnered steam. It used domainers for the traffic and the free advertising that came with it.

    Microsoft may be about to try that route albiet in a different way, owning the actual domain names. Google is hedging, to fight off Microsoft, because if Microsoft had targeted domainers with its Ad network, it would have stood a better chance of challenging Google. And Google knows it!

    Some of the Parking companies are their own worst enemies in the name of fighting fraud. Yes, fraud was rampant and threatening in the early years but times have changed with better technology. They are not putting human analysis to the solution and as a result, take actions that will lead to their own peril.

    Yes, cutting out the middleman is a good thing. Unfortunately, as far as I am concerned, Google is still the middleman. Now think about that.

    You think Parking revenue is low now? Wait till they get rid of the Parking companies. Now, that’s my opinion.

    Regards.

  19. George says

    It’s amazing how many people seem to lack savvy when it comes to basic business sense. So many people are elated at the prospect of cutting out the ‘middleman’. They have dollars signs floating in their eyes. Do any of these people consider scenarios like in entertainment – why actors or writers have agents? Do you really think Jim Carrey would have scored his first 20 mill without a experienced ‘middleman’ to negotiate that for him?

    So people think moving their domains to a company that will not directly speak with them, nor feel obligated to even give explanation for payouts or banning of accounts is a wise decision??? Don’t be so foolish!

  20. Matt says

    Short-term I do not think we have anything to worry about. As of right now, their program is far from being perfect. IF, Google was to improve the program by allowing people to see more detailed stats, optimizing keywords, adding images, or even adding content – then it can be a real threat – but I do not see them doing that for some reason. Google likes to keep things simple.

    Long-term, it will hurt us. Not because they are cutting out the middle man with this new Adsense for Domains parking program, but because they seem to not want to give out their feeds to any more domainers or domain parking companies. Last that I talked to them, they’ll only give the domain feed out to people that have their OWN personal porfolios, not monetizing others’. And they are VERY hesitant doing even so.

    Google just wants to get out of giving a % to other businesses. Period. They didn’t renew the agreement with Ask to allow Ask to syndicate their feed to domain parking companies / portfolio owners. Now half of those partners, or more, are with Google directly.

    At one point, when Yahoo’s ship sinks (and it will), Google will have everyone by their asses.

    It’s a negative look at the situation, but it’s a truthful one at the very least.

  21. adam says

    think that clawbacks are bad with parking companies in the middle . imagine how google will be to work with.

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