“The Happiest Place on Earth”

The domain industry is fascinating.  I have enjoyed being involved in events that are both educational and productive for Click Forensics and me.  The latest event is the TRAFFIC conference held this week in “The Happiest Place on Earth”, Disneyworld of course!  Everyone seemed happy (even though there wasn’t a Starbucks anywhere to be found!).

The domain industry appears to me to be at a crossroads.  While the value of names continues to rise, the earnings from monetization programs are falling.  Domain owners and parking companies are struggling to gain more transparency from Google and Yahoo.  Today, there is essentially no transparency.  Traffic from domains is sent up to Google and some amount of money is paid for the traffic.  While agreements regarding revenue shares can be negotiated up front, without the ability to see inside the black box, the monetization metrics are a mystery.

One speaker at this conference has a deep understanding of this issue.  Michael Gilmour runs whizzbangsblog.com from his home in Australia.  I heard Michael’s presentation and had a chance to speak to him at an after party.

He spoke candidly about the risks that the industry faces from the search engines black box approach.  “The lack of transparency in the whole process means that they are accountable to no one.”Gilmour said.  He accurately pointed out that, “Google has been progressively reducing its network traffic margins from a high of 22.1% (Q1 ‘06) to low of 11.9% (Q1 '08).”

What this means is that parked domain companies and site owners are being squeezed.  This is a trend that will continue.  Advertisers are demanding higher quality traffic and Google has had a hard time delivering that from low quality traffic sites like MySpace.  Enter the parked domain channel.

Gilmour has written a series of blogs addressing this issue.  The eight part series can be found on his site at www.whizzbangsblog.com.  In it Gilmour says, “Google is able to launder a lot of bad traffic with good traffic and make it all pay the same while they themselves can discriminate on what they pay out.”

There is a lot of great quality traffic that comes from direct navigation domains.  This is an industry with lots of smart folks and great ideas to help advertisers sell more stuff.  It will take cooperation and transparency to build value in the domain space.  As Gilmour says, “Unless they (the parking companies) are able to audit Google then they can't ever be assured of their share of the revenue.”

Without cooperation, transparency and standards, future conferences may not be as happy as this one was.

Tom

The San Antonio Stonecutters

Love the Spurs or hate them, its hard to argue with four rings in nine years.  The Spurs represent all that is good in professional sports.  Teamwork, good citizenship and hard work.  They are a model team built on stability and consistency. 

Inside the organization people know the impact Popovich has had both on and off the bench.  It was Pop who had the Jacob Riis words translated and posted in the locker room, 

"When nothing seems to help, I go look at a stonecutter hammering away at his rock perhaps a hundred times without as much as a crack showing in it. Yet at the hundred and first blow it will split in two, and I know it was not that blow that did it, but all that had gone before."

Practice makes perfect and teamwork makes winners.  There are lessons to be learned in all aspects of life from these words.  So hammer away Spurs and thanks for being an inspiring group of winners.

Tom

 

Memorial Day 2008

I have a friend named Joe who passed away earlier this year at the age of 82.  Joe served in World War II.  Although I would often ask him about it, he would almost never discuss it.  Sherman had it right when he said “War is hell” and no one knows that more clearly than those who served our country by being in the middle of combat.

These days there is a great deal of discussion, debate and differing opinions around the current war.  While I respect all of those perspectives, none of them change the fact that we should pause to honor those who have served, and are serving our country.  Our country is what it is because of the brave men and women who have served.  

I hope you will take this opportunity to honor our heros.  A few years ago, I stood with my family in the middle of Arlington cemetery in Virginia.  It is an overwhelming experience.  The 360 degree view of tombstones is a visual reminder of the scale of the sacrifice.

Monday I will place a flag on my friend Joe’s grave.  My son and I will walk through the cemetery and talk about what it means to serve, honor and respect.  It is the least we can do.

Twitter Catches On

Twitter interests me.  No, I don’t know how they will make money, although I do have some ideas (think geo-location and advertising).  I only started “tweeting” in April.  As soon as I did a reporter from the Express-News connected with me.  Laura Lorek has covered Click Forensics for several years and I read her consistently.  She sent me a “tweet” asking for an interview about Twitter.  The result is a well written (and entertaining!) story.  Find it here.

Under the Iceberg

Over the past two years we have been trying to bring attention to the real danger of click fraud.  It is a real problem that is getting worse not better.  Since we began reporting our Click Fraud Index, the overall rate has climbed over 20%.  This problem has been highlighted in mainstream publications including Business Week, USA Today and the Wall St. Journal.  No one today denies that click fraud is a problem and that it is having a negative effect on the growth of the online industry.

What may be less obvious is that click fraud is only the tip of the iceberg.  The bigger issue for our industry is the overall decline of traffic quality.  Advertisers want to get what they pay for and know that the traffic they buy has value.  Problems including: the growth of botnets, out of country traffic and other low quality traffic sources like made-for-ad sites and parked domains are hurting ROI.  Advertisers know this and have been demanding action from ad providers.  One recent example is the poor quality traffic that comes from social network sites like MySpace.  Google surprised Wall St by missing Q4 earnings due, in part, to their inability to monetize MySapce traffic.  Social network sites are notorious for having very low SiteScore’s.

So what is happening?  Smart ad providers are taking matters into their own hands.  They can’t afford to lose business and they are listening to their customers.  By using real time tools to detect invalid traffic, publishers can block it, redirect it or re-price it.  This is the way the industry is moving and we are working hard to lead the way.  It is encouraging to see ad providers like Yahoo see the dangers ahead and help their clients steer clear.  On the other hand, it is concerning others are on a collision course. 

Why Yahoo! Matters

A couple of weeks ago at Search Engine Strategies in New York, Click Fraud made big news.  Yahoo announced a partnership with Click Forensics that changes the tone of the ongoing “Click Fraud Debate”.  Since late 2005 there has been denial, litigation, finger pointing, 17 page reports and lots and lots of media coverage around the topic of click fraud.  In March of 2006 I wrote that, “It will take a community approach to solve the problem”.  Since then the community of advertisers, agencies, third parties, publishers, ad networks, industry organizations and search providers has grown.  We have all been drawn closer together to help solve the problem; not deny its existence.  A visible result of that progress was the Yahoo announcement.

It was just over a year ago that I first met Reggie Davis.  Yahoo was the first search engine to name a Vice President over Marketplace Quality.  Reggie’s approach has been refreshing.  He listened carefully and took notes to what advertisers were saying.  He worked with his team to implement solutions that helped improve transparency.  And now, less than a year later, Yahoo is the first search engine to work with a third-party to fight click fraud.

This is real progress and a sign of things to come.  For quite some time we have been drawing the distinction between traditional media (TV and Radio) and online.  Advertisers are used to having standards, auditable invoices and notarized affidavit’s confirming they get what they paid for. It’s especially important because as pay-per-click industry expert, Dr. Tuzhilin, has noted: third-parties have access to data search engines don’t have. And that information is helpful for identifying quality issues such as click fraud. Yahoo! understands this and we’re now able to share this information to help Yahoo! help its advertisers.

Stealing Clicks

Forbes reporter Andy Greenberg recently published a story with dueling perspectives from my friend Shuman, of Google, and me highlighting our differing views of the click fraud problem. It got me thinking about how far the community has come toward solving the click fraud problem and how far we still have to go.

It was just a little over a year ago when search engine giants – Google, Yahoo! and Microsoft – publicly pronounced their support for the development of industry standards for measuring click fraud with the Interactive Advertising Bureau (IAB). Around the same time they also promised to work directly with third-party click fraud auditors on solutions to the click fraud problem. Although many were skeptical at the time, we thought these promises were important steps in the right direction. After all, just a few months earlier search engines, like Google, labeled click fraud “immaterial.”

Looking back, however, it’s clear not much has been done by search engines to turn these two important promises to advertisers into action. The standards development process, which we also joined to help ensure the voice of advertisers was heard, has lumbered along. We’re still waiting for the IAB to deliver its recommendations for click fraud measurement standards and open them up for public comment. We’re also waiting for Google and the other search engines to work with third-parties. While they have launched traffic quality resource centers and done lots of talking, there has been little meaningful action.  

Meanwhile, back at the ranch, traffic in the publisher networks (including Google AdSense) is abysmal.  Over 70% of the sites that make up these networks are made-for-ad sites or parked domains. Well over 60% of the traffic from these types of sites is traffic advertisers should not be paying for.  Instead, advertisers should be actively excluding poor performing sites and avoiding low quality ad networks.  But it’s is daunting without the help of search engines.  Knowing which ones to exclude is a dynamic process that is tough to do when your information is limited.

So the question is, why the delay by search engines on all these fronts? There are many possible reasons but I believe the main one is economic incentive. When a company doesn’t have an immediate or near-term financial incentive to change, then it won’t.  One only needs to look at the stock prices of certain search engines to see the economic incentive just isn’t there.

I do believe there is a light at the end of the tunnel. Advertisers are starting to pull back on their online spending because of quality issues. It’s only a matter of time before search engines feel the pinch. The spark may just well have been lit by Google’s recent success.

Related Article:

Forbes.com

Stealing Clicks

Forbes reporter Andy Greenberg - 09.24.07, 6:00 AM ET