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Fabulous Follows the 80/20 Rule

by — Domain Parking 8 Comments

Parking company moves to invite only model.

Domain parking company and domain registrar Fabulous is no longer accepting web applications for its domain name parking services and wholesale registration accounts. It will only accept referrals going forward. In fact, the sign-up button at Fabulous.com has been removed. (Fabulous customers who wish to transfer domains to buyers can send them a link to open a retail account).

You’re going to start seeing more of this in the future. 20% of domain parking customers provide 80% of the revenue to the parking companies. (It’s probably more like 5% and 95%). It’s the classic 80/20 rule. Since some domain parking companies use manual processes to get customers set up on their system, it doesn’t make financial sense to serve customers that won’t generate much lifetime revenue.

You’ll also see domain parking companies re-evaluating the acquisition cost of getting new customers. They may shift more of their dollars to referral programs which don’t require upfront marketing dollars.

The Google Adsense for Domains “Online” model, on the other hand, is set up for customers with just a handful of domains. Some domain name parking companies with simple and automated onboarding procedures can also handle smaller customers.

A handful of domain name parking companies, such as HitFarm, Skenzo, and SmartName, have always restricted usage to the biggest domainers.

Hitfarm to Release Domain Parking Index

by — Domain Parking 2 Comments

Index will provide greater transparency.

Domain parking company Hitfarm will soon release the Reinvent Index, an index to track the parking performance of domains.

The Reinvent Index will track the results of 200 categorized domains owned by the company’s parent Reinvent Technology. This will help domainers understand the ups and downs of the parking industry and get insight to how particular categories of domain names. Think of it like a the S&P 500 stock index (although hopefully it will go up, not down).

For example, will automotive domain names do better or worse in the current economic downturn? The Reinvent automotive category includes 10 domain names receiving over 15,000 uniques per month, including CarShows.com, Minivan.com, and CarResearch.com.

Other categories include business, education, health, and music, among others.

This is the boldest step I’ve seen a parking company take to improve transparency. Hitfarm customers who sign exclusive contracts will get even more transparency with the Hitfarm Index to be released in the near future. This index will represent all of the domains under management at Hitfarm. It will not expose individual domains, revenue, or uniques, but will show trending of domain earnings. If a client’s earnings are up 5% this month, they can determine if the lift is due to overall conditions in domain parking or if it is due to unique aspects of his or her portfolio.

More information about the Reinvent Index is available on Hitfarm’s web site.

Yahoo Kills Domain Arbitrage: Fallout for Google, Others

by — Services 33 Comments

Yahoo will stop allowing arbitrage as of this Friday, will affect other major companies as well.

In a major move sure to have ramifications across the online advertising industry, Yahoo (YHOO) has told its advertising partners that it will no longer accept “arbitraged” traffic as of this Friday. Here’s a look at what this means for domainers and even the revenue of big online advertising companies.

Arbitrage Explained
Click arbitrage involves buying an ad click at a low price and the traffic to a page of ads with high-priced ads. For example, you may bid 5 cents for a click at Google and earn 25 cents per visitor clicking on your ads.

Who does (did) it?
Everyone from individual domainers to big companies such as Marchex (MCHX) and NameMedia. Individuals did it through parking companies such as Parked.com and HitFarm (sometimes using sneaky tricks on the latter). (Other parking companies, such as Sedo, expressly forbade arbitrage.) I’ve heard stories about people quitting their jobs because they were making so much money with arbitrage. Generally speaking, this arbitrage has been from traffic at Google and Microsoft sent to Yahoo ads.

Who will be hurt by Yahoo’s change
A lot of people, and some aren’t immediately obvious.

Let’s start with the obvious. People who have used Parked and Hitfarm to create arbitrage revenue will be hit hard. It’s hard to estimate how many people this is, but it’s substantial. Word on the street is that this rule may also apply to people using the Yahoo Publisher Network for ads.

Big companies will also take a hit. When Google (GOOG) changed its algorithms in an effort to decrease arbitrage, a number of big players took a hit. This time around it will be worse. After doing some sample searches today and talking to people in the industry, I think this may put NameMedia’s IPO on ice for now. Marchex also appears to be heavy in the arbitrage game and will feel the pinch. [Updated 2-13-08: I’ve heard now from two places that big companies like Marchex will still be able to do arbitrage. I’m looking into this.]

Don’t fall into any of those categories? This will still affect you if you are a Google shareholder, if you park domains on a Google feed, or if you have Google Adsense ads on your site…

Much of the arbitrage has been between ads on Google sent to landing pages with Yahoo ads. Although Google has eliminated some of the arbitrage, test searches today show a number of arbitrage sites showing up for most keywords. This has propped up click prices, which may tumble as a result. This will be especially prevalent on Adsense sites, since Google doesn’t filter out arbitrage ads as much on Adsense sites compared to its search results.

This could cause Google’s earnings to drop next quarter. Some sources suggest that Yahoo earns as much as $200 million a year in arbitraged traffic.

Who wins?
The first winner is legitimate advertisers on Google’s network that have fewer advertisers to compete against. (Of course, Google could just change its black box algorithm to increase minimum bid prices.)

Yahoo is making this move with the long term goal of boosting click prices on its own network because it believes click quality will be better. I don’t necessarily believe this, and I don’t think Yahoo’s advertisers really know what’s going on. I think arbitraged traffic might covert just as well as regular traffic.

The irony is that, by taking a short term hit to its own earnings, Yahoo has made a competive play against Google. But why now? Why when Yahoo is facing buyout offer(s)? Perhaps this decision wasn’t made with consideration to the buyout. Or maybe Yahoo thinks other sources of revenue will more than cover the arbitraged traffic.

Stay tuned, and remember that all is not well in the domain industry.