Expired Domains

As many of you are aware, there are a few venture capital companies that have started to purchase large domainer portfolios. Marchex recently purchased a portfolio from Name Development Ltd (Ultsearch) for $164.2 million. People familiar with the industry understand why Marchex made this purchase and know that the Ultsearch portfolio should return a great yeild. But many people unfamiliar with domains, including advertisers, still do not understand this move. If advertisers did understand this move, they would be scrambling to purchase domain portfolios directly related to their products, or purchasing one domain at a time.

The one thing that needs to be understood is how Marchex will monetize these domains, to truly understand why they did it. This domain portfolio supposedly recieves over 17 million unique visitors per month. Marchex has begun to send this traffic to PPC parking, where they are compensated for each click on a search result.

Example: An advertiser selling shoes, signs a contract with google to pay $1.00 for each unique visitor sent to their site. Google usually splits this amount with the source, meaning Marchex is recieving $0.50 for each unique visitor that clicks on that advertisers search result for shoes.

Advertisers do see that this targetted traffic can convert very well, if not they would not be paying the rising bid prices for top placement in the ppc search engines. But one thing that they fail to realize is that they can go straight to the source of the traffic, bypassing google, overture, or their advertising firm, and purchase domains that have highly targetted traffic.

Example: If I own consumercounseling.net that earns $5000 per year by having a direct relationship with google, and am sharing 50% of the revenue from the advertiser, then the advertiser is paying $10,000 a year to google. The advertiser is probably turning a profit on these visitors, (let’s say $20,000) if not they would not continue to pay the advertising bids.

Type in domains are generally appraised at 5 years income (because these types of domains recieve traffic mostly from people typing it directly into their browser). So to me this domain, earning me $5000 per year would be worth $25000, but would be costing the advertiser $50000, and earning them $100,000 profit over 5 years.

If this advertiser were to understand this, then approaching me and purchasing this domain for $25,000 would save them $10000 per year in advertising costs. As mentioned in previous posts, the internet is still growing, and as it continues to grow, more and more targetted surfers, visit these typein domains, increasing the potential profit and advertising savings.

I believe, in the next year many advertisers will begin to understand this, and the ones that research domains, and invest will be saving themselves money and have full control over this highly targetted traffic, and retaining the traffic rather than sharing it with their competitors.

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This entry was posted on Wednesday, March 30th, 2005 at 11:41 am and is filed under Now is the time. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.