Tobias Ratschiller's Blog

Domain brokers come and go quickly. A new one contacts us each week. It's the easiest way to get started in the domain business without upfront capital investment. Unfortunately, the people with no money to invest are usually also not the best sales people ever, so the actual turn over rate is low. Even if a domain broker is really good, there are a couple of problems:

• The time investment is significant if you do it right. You would have to do market research, contact end users, advertise. Just sending the name to five of your previous buyers and putting it up on your mini site does not make you a good broker. 
• Most domains sell in the $1,000 - $15,000 range, making commissions unattractive for a single broker or small team. You have to turn over en masse and you would do that by building a marketplace platform like BuyDomains or Sedo, not by single-handily brokering names.

Earlier this year I tweeted a quick advice to all domain brokers out there: Specialize in website brokerage now! I believe there is a significant opportunity for any player entering this market. The leading market place Flippa is overfilled with low value and sometimes downright scammy offers, and domain market places like Sedo simply don't get the website business.

Indeed, Rick Latona switched recently to brokering revenue-producing websites. Here's though six things that I would like to see from a website broker (and this comes from a background of acquiring by now over 75 websites):

1. Verified Google Analytics, and earnings with a stamp of authenticity. Every website investor must still do their due diligence) but when reviewing brokered listing you should be able to assume that at least sources have been verified.
2. Informative offering pages with background on the business and owners. The one paragraph descriptions at Latona's just don't cut it. I would like to see a combination of owner-supplied listing text and a broker description similar to the Flippa-A-List mailing list.
3. Give uniform information about businesses. In an ideal world the broker should work with each owner to create a uniform set of financial data and traffic figures.
4. I'd suggest that brokers focus on high value names with asking price of $50,000 and above. Flippa is okay for the rest and if you want to do a good job as broker, the amount of work you will have to put in does not differ much whether it's a $10,000 or a $200,000 sale.
5. Brokers need to work actively to promote listings beyond their website and mailing lists. Please give details on how you intend to earn your 15 percent.
6. Be transparent. I would like to see your closure rate. Average sales price. Time to close. Team size. Etc.

Earlier this year in March I went on a trip in South America and visited Argentina, Bolivia and Peru. In terms of business it was quite an eye opener for me and I'm convinced that there are huge growth opportunities in Latin America's Internet sector.

It started with the travel preparations. Booking flights or trains in countries like Bolivia or Peru is a pain. To book a flight from Santa Cruz, Bolivia, to La Paz, Bolivia, I not only had to call to make the booking, but I also had to fax in scanned copies of my passport and credit cards.

In general tourism is not well developed except in the most common touristic areas such as Machu Picchu. When we took a boat tour across Lake Titicaca, we (two persons) were alone aboard a huge ship - dedicated tour guide included! For the price we paid (I think something like $200 for the day) this could only be a loss for the tour operator.

Obviously Internet penetration is low at around 25% but even compared to countries like Ukraine with similar penetration rates I was surprised that even for example companies in Lima do not advertise their websites much on their shop signs, flyers etc.


 Of course, once you take a jeep and go for a few hours into the campo, you discover places like San Antonio: no Internet, no cell, no phone, and they got power last November.


While we have a sizeable business directory of Bolivia's Santa Cruz in our porfolio, San Antonio, or the next larger city of Concepcion (10,000 population) don't even register on the map.

The AdSense numbers reflect this general impression: CPM of South America is half of Ukraine, Ukraine is half of Europe. Still the growth of our Latin sites (we have, for example, a business directory of South America) is impressive.

1. How To Start a Startup - article
   I would anyone looking to start a business to this article.
2. The End of Geocities - post
   As a commenter on this post says "Struggling to meet the bills, having a dream, and pushing until you are successful." Everyone sees the successes, but few share the hard realities.
3. Why We Do What We Do - video
   Legendary Tony Robbins TED talk. 
4. 8 Secrets of Success  - video
   Eight secrets, less than six minutes.
   
5. Ze Frank- video + bonus song
   Save the song at the end for the hard times.

It's that time of the year again. I love the time between Christmas and New Year's. Business is quiet and there is time to look back and plan for the next year (even if it usually comes down to the same Pinky And The Brain quote: "Gee, Brain, what do you want to do next year?" "The same thing we do every year, Pinky - try to take over the world!").

2010 was without big surprises in our business. I had said in the beginning of 2009 that crisis years are building years, and in 2010 we continued what we had begun in 2009. We bought over 50 developed sites this year on forums, Flippa, and via private deals. In addition, we started a promising cooperation with the Domain Developers Fund to develop some of their names in equal rights joint ventures, the first ones being TCM.org and Holland.net.

... or how we increased our CTR from January 2010 to August 2010 by over 300+%. You can literally double or triple your AdSense revenue just by optimizing the ads.

Here are some leanings that we found had the most impact on our revenue. This may be common knowledge among publishers, but it took us a while to come this far, and cost us tens of thousands of Euros along the way. Unfortunately, the AdSense Terms of Service disallow disclosing of the exact CTR or other figures, therefore limiting meaningful discussion - probably that's why we didn't find useful articles when starting!

I assume you are familiar with the basics of optimizing AdSense, such as the AdSense heatmap, setting up channels for measuring your experiments, and Google's basic color suggestions.

Split test everything. The software mantra of "Don't touch it when it's not broken" does not apply here. With AdSense, continuous improvement is key. The best way to test is split testing (variation testing), which often leads to unexpected results. Obviously different sites and different industries have different preferences and requirements. It surprised me though how different sections on one website performed significantly different. Here is an example. The Danish business directory on Denmark.net performed much better (0.5%) with a red border than the English language version did - there the red border was actually detrimental to CTR.

How to split test AdSense: Here is a quick way to implement version that serves two or more different channels on the server side with a random distribution. This is easy to do in PHP:

mt_srand((double)microtime()*1000000);
$rand = mt_rand(1,2);

if($rand == 1)
{
// serve AdSense channel A
}
else
{
// serve AdSense channel B
}

You can then easily compare the two channels and see the winner.We split test everything. Font colors, font size, borders (rounded or not?). We actually automate split testing to automatically pick the winner and continue with that until it can't be further optimized via machines.

Color optimization: Should you go for a blended palette or for ads that really stand out? Again there is lots of conventional wisdom around this area which you may completely throw out of the window once you actually start testing.We have not found a single answer to this question - except that you should test!

Placement. Probably the single most important factor of the CTR is the placement of the ads. You have to give special attention to the publisher guidelines here, for example not to place ads too nearby navigational elements. However, it can make be an easy 0.5% difference in CTR if you place an AdSense unit a little bit higher above the fold than in the center of the page. Again, they key here is testing variations.

Best performing ad units first.  Google displays the highest paying ads in the first ad unit of the page. So make sure that first unit is your best performing one! You may need to use CSS positioning to show ad units higher up than they are actually in code. For example, you may have a header ad that doesn't perform well and a in-content ad that performs well; you would now use CSS to position the header ad unit in the header of the page even if in the source code this ad unit comes second.

Section targeting: Using section targeting, you can highlight to the AdSense bot which parts of your page contain the main text body to which the ads should be targeted to. This can make a huge difference by serving ads that are actually contextual.

Direct placements: AdSense has two ways of serving text ads: In the first way, Google does all the logic of trying to understand your page and the visitor to serve contextual ads. The second way lets advertisers target your site directly and place ads in specific channels on your site (if they are enabled for it). It's important to know about this, since the CPM and CTR can be wildly different for the two scenarios. If you go to a channel in AdSense that is currently enabled for external placement, there is a link called "View 7-day earnings" which shows a report comparing the direct placement performance versus Google's. In our case, the direct placement was generally under-performing by 30-40% except on specific pages, so we disabled direct placement for many channels.

Heat maps: While basic heat map optimization is explained by Google, it took us awhile to apply it across different sites. Here is just an example of how a "minor" repositioning can add over one percent to your CTR.

Old:

New:



Just moving the information sidebar (company logo and some text) on our South America business directory from the left of the content to the right increased the CTR by more than one percent.

Demographic-based optimization:  Since most of our sites have anonymous traffic, we rarely do this, but for web properties with many signed in/identified users, this is huge. I've seen examples where just serving different colors for men and women lead to a CTR doubling. I'm sure this is taken to excellence by the big portals.

Hire an AdSense optimizer: If an expert is able to increase revenue by 20% on an account, then for sites that have at least some basic AdSense revenue (5k/month plus) this would be a worthwhile hire.

Meanwhile, just keep optimizing, it's actually one of the fun parts of the online business because every bit directly translates to more money in your or your company's pockets.

1. There is only way to do it: My Way, Frank Sinatra.
   "Yes, there were times, I'm sure you knew,
   When I bit off more than I could chew,
   But through it all, when there was doubt,
   I ate it up and spit it out."
2. Say it loud: We Are The Champions, Queen.
   "No time for losers
   'Cause we are the champions - of the world"
3. That's what we do. Build. Rock and roll. We Build This City, Starship.
   "We built this city on rock and roll"
4. This song is for the n-th hour in the airport lounge: One Night in Rio, Louie Austen.
   "Well after flying for seven hours in economy class
   I was really mad, three crying babies
   And no more liquor, and no sleep"
5. Need some energy? Yes, Yes Y’All, Sergio Mendes.
   "And you don't stop, and you don't quit."

Here are a few thoughts on the state and future of domaining.

1. Domains Sustain Brands
The primary use of a domain is to build or to sustain a brand. The primary goal of a brand is to drive sales.

A generic domain such as Candy.com is an instrument for a business to advertise them as category leader and to ingrain them into the mind of consumers as such. A brand thrives on resemblance, and a common word with ".com" at the end is easier to remember than an artificial name. Therefore, the more "common" a domain is (generic, .com), the more value it has for the brand. The less common it is (artificial names, less known TLDs, potential typo TLDs like .co or .cm), the more money has to be spent in marketing and advertising to achieve brand awareness.

2. Type-In Traffic Is Dead
In the early years, domains had type-in traffic - people typed generic names into the browser address bar and the browser appended the ".com."

If you type a generic keyword into the address bar today, IE will try to go to http://keyword, Firefox will go to the first Google search result, and Google Chrome will search Google for the keyword.

Even if you consider direct navigation traffic as type-in traffic, users only type domains they remember very well (twitter.com, google.com) directly into the browser, and they do so at an decreasing pace. Many users default to using a search engine even for direct navigation. Some studies say such navigational traffic is 15% of all searches.

On most large websites, direct traffic is less than 5%. Anyone with a nephew who is half skilled at SEO can produce more targeted search engine traffic than even the best undeveloped domains get.

If you have a domain portfolio with thousands of targeted names, type-in traffic will obviously amass to decent, yet shrinking traffic numbers - a thousand drops will form a puddle eventually. Money with type -in traffic is only made at scale.

For anyone else, type-in traffic is just not a relevant factor anymore.

3. New TLDs Need Branding

If we believe that the goal of a domain is to sustain brands, new generic TLDs will have to become brands themselves. If nobody recognizes "newyork.restaurant" as a web address, marketing money spent promoting it is in vain. This is a factor in favor of .brand TLDs (such as .canon), which, together, may change consumer adoption at a faster pace.

4. Applications Before Brands.

What makes the Internet interesting are its interesting applications. If you have a great idea, like Twitter or ChatRoulette, and can execute it well, the brand will be built virally and the name and domain don't matter. It's advisable that you don't get a really stupid domain like flickr.com or you will waste millions of visitors on flicker.com. But that's about it - you don't need a category killer, multi-million Dollar domain if you have the idea and can execute well.

5. Domain Investing Is Here To Stay

There always was and always will be money flocking to marketing and branding. Since good domains are finite, they will stay valuable assets and continue to attract money in the secondary market.

6. Domain Values Will Continue To Rise

Since domains are part of branding and marketing, it's ridiculous what amounts of money we are talking about when we look at most domain sales. In a corporation's marketing budget, $100,000 is a rounding error. Even private people blow $50,000 or $100,000 on a new car, Small businesses spend hundreds on letter heads, business cards and USB stick gifts. Yet a domain that can make an entrepreneur's marketing life so much easier is not seen to have value by many. The actual value of the fundamental structure that a domain can be to the branding process cannot be overestimated.

Much of the increase in value will come from end user sales, though, as established domainers continue in a wait and hold position, or even sell select names. Auctions and insider aftermarket will continue to be weak.

7. Parking is Bad, But It's Nearly Dead

Fortunes got built on parking, but really, a parked page is as useless to a consumer as a one way street plastered with billboards. Today, parking only makes decent money on typo and trademark infringing names. That's not going to get better and even large portfolio holders are moving away from parked to slightly more useful models such as Demand Media's or Epik's.

8. There Is No Such Thing As A Developed Site

Domainers talk about developing sites but in reality you need to develop businesses. Cash-earning, income-producing, profit-making businesses. This is actually quite hard and many domainers simply have skill sets (analyzing, collecting, investing) which are not natural fits for starting a business. Even worse, the curse of easy money from parking got many domainers lazy and unwilling to invest in learning new business development skills.

9. The "Domaining Industry" Will Remain Stagnant

Actually what calls itself "domaining industry" is composed of 70% run-alongs who couldn't tell a good name if it was delivered to their house with a gift wrap, 30% domain squatters who live off typo and trademark domains, 5% people who try to find real investment opportunities and 5% professionals. Probably there are less than 250 professional domainers in the world who live from pure domaining income. Conferences in the industry are ridiculously small with 200-500 attendees at best - compare this to SEO or affiliate events, heck even with gaming, adult, or geek conferences, all of which draw larger crowds regularly. Not to mention that half of the domain conference attendees are sponsor employees.

Unfortunately, for every one of the 70% wanna-be-domainers who leaves to greener pastures, there are five others who come to try their luck at domaining. The barrier to entry to this market is the $10 reg fee.

Most of these gamers have no real purchasing power, so they are not even influencing the secondary market. Further, there is minimum correlation between purchasing power and where you fit in the industry (the 70% idiots end or the 5% pro end), so often money is spent on non-assets like trademark domains in land-rushes (like $7k on porsche.me, subsequently lost in UDRP).

Most of those 5% with a significant interest in finding opportunities will move or at least get more involved in other web marketing industries (SEO/SEM/affiliate/tech).

What actually makes up the bulk of the real domainining industry is registries and registrars.

10. Registries, Registrars Will Remain Cash Cows

While nobody knows at this point how successful the new TLDs are going to be, one thing is for sure: those who will make immediately money of them are the registries themselves and the registrars. Those who already distributed 200 million domains will continue to do so in new TLDs. Registrars don't particularly care which TLDs are in demand as long as their absolute sales increase. Registries on the other hand will continue to suck the money out of domainers with creative land-rushes and auctions.