Domaining Heating Up, Again

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The WSJ has an article about the launch of Demand Media Inc., a company that aims to combine bulk domaining with minimal cost social content to make fat bank from thin content contextual ads:

These sites' ability to make lots of money for little investment is now attracting attention from big players. A group of investors led by former MySpace.com chairman Richard Rosenblatt is expected to announce today that it has raised $120 million from investors to build a new company, Demand Media Inc., centered on generic domain names like these. The venture has already acquired 150,000 domain names -- including flashgames.com -- and plans to aggressively acquire more. But, conscious of the limitations of these bare-bones sites, it plans to add some low-cost content in hopes of making the business even stronger.

In line with Mr. Rosenblatt's plans to add some cheap content to his sites to give visitors a reason to come back, Demand Media has already purchased San Francisco-based eHow Inc., which provides niche content, and will buy more content companies. But he isn't planning to invest heavily in content -- Mr. Rosenblatt says his goal is to have "immaterial" content costs. Instead he plans to rely heavily on content contributed by members of the public, which could range from reviews and blogs to photos. Such "user-generated content" powered the growth of Web sites such as MySpace.com, now one of the most popular destinations on the Internet.

To provide the technology for offering upgraded content, Demand has also purchased eNom Inc., a large domain name registrar based in Bellevue, Wash. With better content, Mr. Rosenblatt says, the Web sites will appear higher in search-engine listings and thus attract more visitors. That in turn, will hopefully translate into more clicks on the links -- and more revenue.

Will search engines index these thin ad sites? Will these new sites cause a glut of ad supply that causes content ad CPCs to drop? How will this affect small publishers? Will eNom start shill bidding or driving up bid prices on their own expiring domains?

If engines chose to index these hundreds of thousands of thin content sites I could see these saturating many markets and likely forcing some algorithmic changes...especially if 150,000 of them are in the starting portfolio.

Comments

But he isn't planning to

But he isn't planning to invest heavily in content -- Mr. Rosenblatt says his goal is to have "immaterial" content costs. Instead he plans to rely heavily on content contributed by members of the public, which could range from reviews and blogs to photos.

What *reason* will he give for people to join up to low-quality sites to post their content to them, if they can do that better on higher quality sites?

Surprised to see they bought eNom as part of the deal.

GREAT !!!

A lot of content contribtion will be done many people REALLY like blog comments and GuestBooks ...
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I sugegst they put 119M out of the 120 to develop the "contibuted content" filters ...

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enom

is a good move. First shot at a ton of domains. Major conflict of interest for a registrar though.

One of the dirty little secrets ...

at the SE that shall not be named, is that overall, advertising CT rates on type-in domains are actually higher than they are on the mother site. BUT, even now, these type in domains are mainly being filtered from the SERP's on the mother site, yet curiously, pop up from time to time on search distribution partner sites (domainers need only check their log files to see it). :P

A day is gonna come when the SE's filter these pages from the SERP's entirely, and I very much doubt that a bit of thin content is going to help. Not that that will kill the game. It'll just narrow the margins a bit ... from staggering to simply huge ... by limiting most of the traffic to type-in.

Meanwhile, if I had any domains that I cared about at eNom, I'd be planning on moving them to other registrars, very soon.

Cheesy salespeople

Google is allowing these parked domain pages to operate like cheesy commissioned salespeople. They don't really care what links they point you to, as long as they get good click throughs (and make $). If the user was aware this was happening (e.g., if the advertising was transparent and they could see these fees), these sites would have to change dramatically.

You can read my post on this here

"Will these new sites cause

"Will these new sites cause a glut of ad supply that causes content ad CPCs to drop? How will this affect small publishers? "

Most likely they will not be part of the content network and will be able to pull ads similar to those of the domain lander sites. These generally fall into the group of non contextual ads, meaning you do not usually have the choice to opt out of these sites or networks and are considered either a partner site on google, or maybe even google traffic.

"Will search engines index these thin ad sites?"

Who cares, usually domainers are going after the value of type in traffic...with their content model they say they want return visitors...SE traffic would be gravy.

Devils Advocate

If I owned bigbrand.com I would rather pay the meager contextual ad click price and get the traffic from a domain typo, as opposed to anotherbigbrand.com registering the domain and using it against me ...

Let's not get confused

Let's not get confused here.
There are different types of domain name traffic with different values.
Generally speaking from the domain name perspective there is:
1) Website Traffic
2) Domain name traffic

The first 'website traffic' includes the wide variety of traffic that most of us here know and love. This includes traffic from banners, links, emails and of course our must loved search engine traffic.

The second group, 'domain name traffic' is where the visitors are arriving at the url because of the domain name.
For the purposes of this description I would then further break this group into expired, 'typo' and 'type in' traffic.

The confusion comes when people/webmaster don't appreciate the difference between these.

Domain Name traffic:
Expired:
This traffic is generally found when a webmaster forgets/decided not to renew a domain name and it is release back to the public for registration. The traffic comes from the old links, book marks and visitors. Over time this traffic will dry up and the domain will return to it's original value. Typically this traffic is not a great converter unless perfectly matched with an affiliate program or the web surfers are not particularly savvy.

Typo:
This traffic is a result of people mis-typing or spelling a domain name when they enter it into a browser. Unlike expired traffic these domain can actually attract more traffic over time.
Many typo domain generate their traffic from trademarked terms or brands which not only makes them a legal mine field but also means the traffic is totally dependant on the above the line promotion from the actually brand owner. e.g you might own nike-shoes.com. Would this domain get traffic? Yes, would you make money? Yes, Would you receive a lawsuit in about 48hrs of registering this domain name? yes ?
This is not to say that all typo traffic is the same. If I owed shose.com (a typo for shoes)I could do very well forwarding this traffic onto a shoe retailer. I would not have any legal ramifications (unless shoes.com is a trademark) and the traffic would convert really well. So if I was a merchant and noticed this domain pointing at my site I would actually be very happy. (please note I’m assuming shoes.com is not a site here, please look past that for the ease of the example)

Type in: This is the domain name gold. In the domain name market this is like a #1 Google ranking. With a pure generic type-in domain name you literally don’t need to do anything. You just park the domain and count your cash. While many of us webmasters talk about residual incomes generic domain names actually deliver.
To follow on from the above example the domain name shoes.com (discounting any website and branding work) would actually have visitors. And not just a few, but 100’s of unique people who every day who start their “web search” by typing in the domain name shoes.com. Why? Because they are looking for shoes. The best part is that these visitors are incredibly receptive to whatever if on the domain name shoes.com, after all this is the domain name and they typed it in. This is one of the only alternative ‘pure’ traffic sources outside of the search engines. Unlike most other traffic sources pure type-in traffic generally goes up over time. Unless the domain happens to be in a market with reducing interest like ‘the millennium bug’ or ‘midi discs’.

Unfortunately Demand Media are far from first movers. The domain name business is old and well established so the business will need to pay a premium for any domains they acquire. And while I think the content generation business model has logic they will be going up against established players like fabulous.com which has the competitive advantage of being the 16th largest registrar in 2005 http://www.domaintools.com/internet-statistics/registrar-stats-2005.php and already has a head start ion the content generation.
Sounds like this might be a case of good money chasing a good idea but failing to actually do any research into the competitive landscape before entering it. I mean, I hear there is money in computer, maybe they’ll start making them too.

Why then are domain firms advertising?

If type-in, typo and expired traffic are so good and monetizable, why over the last six months have I had more domain firms call me about starting/growing ppc campaigns than ever?

I smell a rat. Domain traffic converts poorly, type-ins are becoming a smaller % of total traffic, and therefore they're running to prop up their model with ppc traffic.

Am I wrong?

Trademarks blah....

unless shoes.com is a trademark

There are *many* examples where the trademark owner couldn't reverse hijack the domain.

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