Feb 27 2008
It’s Happening As Predicted, Now What?
The glory days of your domains getting you paid to do absolutely nothing is about to come to an end. It really is around the corner and will change the way we do business forever. I predicted this long ago and most recently in Novemeber 07. PPC is down across all platforms and at least 50% has to do with Google and Yahoo improving strategies to give advertisers more bang for their buck. These strategies will not include your undeveloped domains. Big trouble for alot of people!
The article below goes into detail what I am talking about. So many people have become dependent on PPC to run their day to day activities in the domain industry. As many are finding out, profits have dropped imensely and it will not be long before we start to see the market flooded with domain deletions. For years PPC has paid for the renewal of domains that made it a wise investment.
But, what happens when that revenue that was used to renew your portfolio drops by 75%? I think we all know the answer to this question. Will we see some of the owners who manage large portfolios in financial trouble this year? Signs point to yes. Every owner will try to keep as many domains as possible, but if no money is coming in to pay for renewals, portfolios might decrease by 50-75%. Makes no sense to own a domain that does not earn money, Isn’t that the “Golden Rule” for the most part? Sure there are those that have a chance of selling, but overall, approximately 90%-95% of domains in the majority of portfolios is purely speculative.
PPC is coming to an end for undeveloped domains and the proof is in the pudding. Advertisers want results and ads placed on developed websites. The next level of the domain industry is evolving and it will be development in order to generate revenue.
Many people in the Geo domain industry saw this coming years ago. Development was essential back then, and it is just as neccessary now. Those who embrace development will become the new industry stars of tomorrow. This is evolution at its best! The key is to develope wisely, so that you meet the consumers needs, not yours. Once you can master this task, you build loyalty and the advertisers move in.
This industry is very young and advertisers are starting to take notice of the geodomain market. Geodomains with content perform 10 times better than a general website. We all are in a good place, and selected the right path to embrace.
The Geo domain industry is going main stream and it is the center where advertisers want to be. It has begun to explode due to manifestations on the internet economy and consumer behavior. When we look back 2-4 years from now, we will see how this industry transformed the way consumers use the internet and access their local information.
Even the most generic name in the world, wants to be local!
I posted this on Rick’s blog a few days ago, and I’ll post it here also.
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I foresee big changes in the coming year or two.
The price of virtual real estate has been going up every year. Income generated from this real estate is going down (PPC income is lower, no more arbitrage, etc.).
The old parking model that made many large domain portfolio owners very wealthy does not have a viable future. Bland parking pages will soon run their course as end users won’t be clicking on those ads like they used to, reducing domainers’ revenue even further.
So, large portfolio domain owners need to do something different to cover their annual renewal expenses. They either need to sell their assets while they can get a premium for them, or they need to invest serious money developing them into useful sites that will attract AND BRING BACK visitors.
While some domainers are starting to develop sites that actually have value, most domainers don’t have experience developing websites or building businesses. They only know how buy domains and park them.
It behooves the high profile domainers like Rick and others to tout what a great investment domains are, as it keeps rasing the value of their holdings. Then, they will sell them for a premium. You will probably soon see the one word generics (such as candy.com) sell to a large corporation (such as Hershey) that will pay top dollar. Parked pages will start to disappear, as will the parking companies.
I have a feeling that this phase of Rick’s 20 year plan is to sell off his domains to these corporations who will pay the most. Smart guy… buy low, pump up the market, sell high.
Been saying that for years.
You have to Build Build Build.
Being new to the Domain industry, it seemed obvious that the glory days of parking a domain and watching the money flow in was going to come to an end. People want to see content on pages that they browse to, not just a bunch of links to other sites. I agree with the statement of Build Build Build, like the saying if you build it they will come!!
I agree in general with your philosophy and statements. I, too, and a believer in geo domains. I, too, believe that development is the next wave.
This is one of the reasons I don’t think that people who sold their portfolios for 5x-7x earnings made particularly bad decisions. Although I think this is a bit low, it gives a return of at least 20% annually. There’s a lot of risk here; the value of those portfolios can go down especially if it includes a lot of two or three word type-in domains that would be difficult to monetize through anything other than PPC.
The one thing I’m not sure about is your statement ” PPC is down across all platforms and at least 50% has to do with Google and Yahoo improving strategies to give advertisers more bang for their buck”. Do you have any stats to back that up? I just don’t think it’s true, and it’s certainly not what I’ve seen.
***SMO***
Andrew,
This is based on my own portfolio performance, I should have mentioned this. It has dropped imensely. There have been many people who have said their earnings are way down as well.
To all, how much have your PPC earnings dropped in the last 2 months?
and that is why we are building pay per lead parking pages.
My earnings are down about 15% in the past 2 months. My google adsense earnings haven’t changed however.
This is great news…for people like me who want to develop. Perhaps there will be some nice buying opportunities in the near future.
Development isn’t easy - it takes a lot of work, knowledge and (usually) money.