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BLACK GOLD

I am lucky on so many levels.  Not only in business, but I get to share my thoughts and opinions with those who care to know them; and some do.  I certainly never thought I’d write a blog.  Long before blogs the best outlet for venting of ideas was a magazine or periodical which might let you write for them. You had to be powerful or famous enough to convince the publisher that your opinion mattered.  Readers were often left wishing that those who could write, would acquire power and that those with power, would acquire the ability to write.

Back in the mid 20th century there was a man who’s opinion mattered, who was very powerful and who could write very well. He came from a business very much like the domain name business, a world of roughnecks and fringe players who became very rich, very quickly. He thought out of the box like many of us:

“”In business as in politics, it is never easy to go against the beliefs and attitudes held by the majority.  The businessman who moves counter to the tide of prevailing opinion must expect to be obstructed, derided and damned””. – J. Paul Getty

Getty wasn’t just your average lucky sperm type.  He was born rich, but he was a clever guy with an ability to make money on his own, and the oil business he helped shape, rhymed very much with the domain name business of today.  Wildcatters, and risk takers, ridiculed as unsophisticated speculators.  Getty didn’t have a blog.  He was wealthy and powerful though, and that made him interesting to the publisher of Playboy magazine:

“”Why did I choose PLAYBOY as the medium through which to express my views?  PLAYBOY enjoys a very high readership among young executives and college students. These are the individuals who will be the businessmen and business leaders of the future. These are precisely the individuals who would be likely to benefit from any information I might impart as a result of my own experience in the business world.””

Getty’s reasons for sharing were very altruistic:

“”If, by writing, I have passed my message on—even if only to a receptive few—then I shall have achieved my purpose and received a very rich reward in the form of personal gratification from the thought that I have in some small measure helped spread and strengthen the principles in which I believe.””

Well done and well said Mr. Getty. Everyone who blogs today, shares that sentiment on some level. Consider for a moment how his oil business had great similarities and parallels to the present day domain-name space:

“”In the late fall of 1915, a half-interest in an oil lease was offered for sale at public auction. I inspected the property and thought it highly promising. I knew other independent operators were interested in obtaining the lease, and this worried me. I didn’t have much money at my disposal—certainly not enough to match the prices older, established oilmen would be able to offer. For this reason, I requested my bank to have one of its representatives bid for me at the sale without revealing my identity as the real bidder.

Surprisingly enough, this rather transparent stratagem accomplished the purpose I intended. The unexpected appearance of the well-known bank executive who bid for me unnerved the wildcatters. They assumed that if a banker was present at the auction, it could only mean that some large oil company was also interested in the property and was prepared to top any and all offers. The independents glumly decided it would be futile to bid and, in the end, I secured the lease for $500—a bargain-basement price!

Soon thereafter, a corporation was formed to finance the drilling of a test well on the property. I, as a wildcatter with no capital of my own, received a modest 15-percent interest in the corporation. I assembled a crack drilling crew, and my men and I labored to erect the necessary wooden derrick and to rush the actual drilling operations. I remained on the site night and day until the drilling went into its final stages. Then, as I’ve related, I found it impossible to stand the nervous strain and fled to Tulsa, where my friend J. Carl Smith brought me the news that the well had come in.

The lease on the property was sold to a producing oil company two weeks after that, and I realized $12,000 as my share of the profits. The amount was not very impressive when compared to the huge sums others were making, but it was enough to convince me that I should—and would—remain in the oil business as a wildcatter.””

How many of us have been down a similar road, had similar ROI’s, been just as nervous or employed familiar strategies and tactics to secure the domain-name we need?   Thumbing through Mr. Getty’s exploits I came across this vignette which had chilling parallels to the paid search traffic side of the domain name business in 2010:

“”As soon as I d brought in Cleaver Well Number One— which produced an impressive 5100 barrels a day—I cast about to find a buyer for my crude production. To my dismay, the firms I approached refused to deal with me. The motives behind this evident boycott became infuriatingly clear within a few days, when I received several calls from brokers offering to buy the Cleaver Lease at a very low price. The brokers refused to name the principals they represented.

Certain interests wanted my lease. Either I sold out at a ridiculously low price, or I would be left without any market for the oil produced by the wells on the property.

Unable to sell my oil, I had to find some way to store it. The only storage facilities available in the Los Angeles area were in a defunct refinery—two storage tanks with a total 155,000-barrel capacity, which I immediately leased. In the meantime, even while I was vainly seeking a buyer for the 5100 barrels of crude my Well Number One was producing every 24 hours, Well Number Two came in for a 5000-barrel daily production. This was followed in short order by Number Three, which produced 5100 barrels a day, then by Number Four, the runt of the litter, which brought up 2100 barrels daily. This production rate was rapidly filling the two storage tanks—and I was still unable to find an outlet for the oil. I knew that when the tanks were topped off, I’d have no choice but to shut down my operation entirely.

Obviously, I was receiving no income from the four wells. My fluid cash resources—already strained by drilling costs— dwindled rapidly as I paid for leasing the tanks and for trucking my crude several miles from wells to storage. The situation could have easily turned into financial disaster. I decided to make a frontal attack on one of the biggest of all the major oil companies—Shell Oil. By a fortunate coincidence, Sir George Legh-Jones, then the Shell Company’s president, happened to be visiting in Los Angeles. In desperation, I aimed high, asked for an interview with him personally, and was informed that he would be happy to see me during his visit.

A warm, friendly man, Sir George listened attentively to what I had to say. The deepening scowl that etched across his face as he heard me was all the proof I needed that his firm was not a party to the boycott and that he heartily disapproved of such tactics. When I finished talking, he smiled his reassurance.

“Relax,” he grinned. “We’ll help you.”

As a starter, the company would buy the next 1,750,000 barrels of crude oil produced by my Cleaver Lease wells, Sir George told me. In addition, a pipeline would be constructed to link my wells with the Shell Oil Company’s pipeline network—and construction work was to commence the very next day.

Sir George and the Shell Company were as good as their word. Shell’s work crews arrived on my Cleaver site bright and early the following morning and started to lay the pipeline. The boycott was broken—and the Cleaver Lease was safely and profitably mine!””

The present day Domain Name traffic business needs it’s version of “Sir George” to reach past Google and Yahoo, unlocking the value of our traffic.

We all know that domain name traffic is the best quality crude-oil of web traffic.  Increasingly the major keyword marketplaces such  as Yahoo and Google have taken that high quality traffic and dumped it into the same keyword marketplace hopper with arbitrage, garbitrage, and other forms of toolbar crap.  That traffic then gets smart priced and shaved down under the guise of “quality control” resulting in pay-rates for domain traffic which are held artificially low. Our traffic underperforms it’s historical averages and we get paid way less than we should. The domain name channel should be included at a parity (un-smartpriced) to Google and Yahoo Owned and Operated Search-box traffic. It is at least as good and often better in quality than Yahoo’s O&O search-box search and it has no place being dressed down and dumped in with other low quality forms of traffic.

The way to break this stranglehold is obvious, stop selling your PPC traffic to Yahoo and Google’s keyword marketplaces.  That’s easier said than done because Google and Yahoo have created a system which pays out just enough to enslave network operators and keep them at heel. Their stranglehold on the market has created a strange bi-polar world which makes it difficult for new paid-search networks to gain scale and become viable.  They can crush would-be competitors as they rise from the crib. We are approaching the tipping-point though, where disintermediation like that employed by Mr.Getty in the example above is not only possible, but certain. Pay-rates to domain name owners and publishers are just too low.  We are at the point where it is becoming illogical to sell traffic. The consequence of pulling traffic away from PPC and selling directly to large advertisers is shrinking dramatically.

The fact that flat rate sales could be contemplated by high quality “owned and operated” domain publishers, shows you how broken the present PPC marketplaces are.  Our high quality traffic employed as a crutch to carry low quality crap traffic from arbitrage, mixed with mud and laundered back into the Yahoo / Google marketplaces from 3rd and 4th tier networks. Domain publishers even tacitly encouraged by those marketplaces to consider arbitraging grey traffic in with their whitest whites as a viable way to gin revenues.  It’s such a shame but a fitting tell of the times we live in; where the game is just rigged.  False metrics designed to obfuscate real economic values. People deliberately turning a blind eye to logic in favor of the applause meter.  All justified and guided by a broken compass.

The bright spot of name sales shows us the way up, or “out”.  The values of domain names and multiple offers we receive prove that traffic is still valuable outside of the paid-search networks.

A savvy group of lead generation experts are the new wildcatters, working the fields of domains and trying to strike black gold.   As the guy who owns many of the fields with pay-dirt potential, I am thrilled that there’s a healthy and vibrant marketplace for the leases I have to offer, and I’m clearly glad to be generating healthy cash-flows in such trying economic times. But I am saddened by what has happened to the nature of what was once a much more transparent and honest business.

Most advertising buyers are blissfully unaware how the traffic they buy is really generated. And most analysts reading the latest Comscore rankings are unaware how those big traffic numbers they see are generated. They imagine people dutifully typing into Google or their browser to visit all those high-ranking sites. Well there is a real mess in that slaughterhouse. Enough to turn most ad-buyers and analysts into vegitarians. Even the experts are oblivious to the gaming and buying of outside low-quality traffic in order to increase the Com-score numbers for a better quarterly story on the earnings call.

While all these things are disheartening, the biggest disapointment for me is the business I’m closest to. I’m shocked that the dominant paid-search keyword marketplaces are so greedy and short-sighted that they would risk losing control of a valuable resource like domain traffic. Lose it they will.  I predict within the next 5 years or so, most high quality name traffic will leave it’s present PPC deal looking for something better.  Too many operators are quietly and not so quietly milling about. The seats will change. I just wonder what these networks will use to add to the mix when the light sweet crude of web traffic: type-in domains, begins to slip between their fingers and into stronger arms.  You may want to collar that search-stock price gain, if you haven’t already.

This entry was posted by frankschilling on Wednesday, September 1st, 2010 at 1:58 PM and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.


67 Comments

  1. Altaf says:

    @Uzoma
    I liked, “No one should be allowed to trade mark alphabets. If someone feels that a name is important to them, they should register it or buy it from someone who did.”
    I got recently a threat from deutsche bank for registering the plural tld as if I am infringing TM.If they needed why they did not register all possible name nearest to theirs.Any comment from folks if they could sue me.

  2. "Red" Oakes says:

    $0.02 from a NAVTEQ employee / new born domain speculator:

    Bing is integrating NAVTEQ 3D, address and POI geometric and video data into it’s upcoming physical location navigation products.

    This “next generation” physical address and POI search product line-up will make Google Earth / 360 look and feel pretty “yesterday”.

    It’s obvious the value Frank and other owners of “real cyber-addresses” have to offer could undoubtedly be equal to the “real world” addresses Microsoft / Bing is investing so heavily to help you find.

    What is at the end of the “gps” search should satisfy, entirely.

    I constantly find owners of “generics” opting to put their products out there as not much more than a parked page of links that are hard to love, if even enjoy. Many develop, but often miss the sought-after value that makes a visit a pleasure, followed by a re-visit.

    Google is strong on link value – I’m not so much. I am a “term searcher”, I want to enter the term to see the “source for” or “authority on” the certain (example).

    I am also firmly against over (or total) monetization. I don’t want to “pick on” a particular generic, but I will touch on just one.

    In my perfect cyber-world a query for “map” should direct me to “map.com” as the first “organic” result. Once there, I should be able to find directions, estimate distances, locate a physical address or POI, (along with many other products and services) with relative ease within the site.

    My Google search for “map.com” showed map.com at result #5. Entered only as “map”, map.com is nowhere to be found. Why? Is it because the site has absolutely zero value for me, only link page after link page to end up where? Sites I don’t want or need.

    If I want to search, or “gaze” at a map online, I would expect “map.com” to have “the best of the best” of what I need. In this instance this site fails miserably, in my view.

    A quick search for any given term should satisfy. I don’t expect to follow my gps to a store offering directions for where I want to go.

    May the true leaders of the name space step forward and lead.

    The owners of generics absolutely should shoulder the weight and responsibility of a catalyzing movement toward true development (ie: quality & usable content). Develop them well or sell if you are unable or unwilling.

    Show them some love and your generics should Google at the top of the first page every day and forever. And I will visit because you will have what I want.

    Moral: Don’t try to conquer the beast. Become it’s friend. Meanwhile go talk to Bing.

    And become defragmented. As a unified group we will win.

    Thank you Frank – really do appreciate you.

  3. nick says:

    ^ what he said again – Frank i love google – they are great at what they do – but for so long they have lead the charge at RAPING domainers for what they are worthy.. So Frank Go after Bing – Go hard.

    I am loving The current intergration with yahoo they just did – All my domains are ranking on the front page for this term or what. :)

    Go after bing – dont blink unless you have a couple of million dollars in your Pocket – Watch the Cash Roll in – Level the playing field.. watch google come to its knees…

    Buy a Jet – Send me a bottle of Don Perignon.. :)

    Live Life – Be happy :)

    Cheers.

  4. I would like to respectfully comment on some of the things you said in this post. It seems to have stirred a lot of folks up, as it should.

    “The present day Domain Name traffic business needs it’s version of “Sir George” to reach past Google and Yahoo, unlocking the value of our traffic.”

    Shell wasn’t buying the oil, then because Getty contacted someone in authority, they starting buying it. Our traffic is already being bought even though prices are down (more on that shortly). It’s not nearly the same thing in my mind. A new purchaser of traffic might help things, but as it is, the market for selling traffic just got smaller with Microsoft taking over Yahoo’s search (for now).

    “Increasingly the major keyword marketplaces such as Yahoo and Google have taken that high quality traffic and dumped it into the same keyword marketplace hopper with arbitrage, garbitrage, and other forms of toolbar crap.”

    “It is at least as good and often better in quality than Yahoo’s O&O search-box search and it has no place being dressed down and dumped in with other low quality forms of traffic.”

    I don’t think you have talked to many that spend a lot of money advertising. You are right that many don’t know where their paid traffic is coming from, but I do.

    You seem to thing the domain traffic is high quality. Why? Perhaps if I had domains with no hyphens and less than 3 words I would understand. :-) But part of the problem is that there are domain owners out there that commit click fraud and even conversion fraud.

    Are non-fraud arbitrage and toolbar searches a lower quality than typeins? I think not. The user is still looking for something despite the method they they arrive on your page and click on the ads. The problem is with FRAUD.

    As a domain owner (1,200+) and also an AdWords consultant, I see both sides of this situation, and I can tell you that high-profile keyword campaigns get hit hard with fraud. My estimate is 25%-40%, but with the growing amount of conversion fraud it’s hard to really pin it down. I can tell you that while I have seen some good conversions come in from parked domains, I have also see clear cases of fraud on a pretty large scale. education, shopping, sports, hobby, and pets domains getting clicks for legal services. Could it he honest? Sure, some could be thinking they are on a “search engine”. But not most of it, and most of the fraud is on domains registered to non-us owners. Big surprise there…!

    Lest I just complain without offering a solution, it’s simple to me: “Flat-rate advertising” to replace bidding, or “bid-for-flat rate”. Sure our income may go down a little for a while, but as advertisers learn they can get more value for what they are paying, that should increase. My biggest client no longer advertising on the Google content network (now Display network). Too much fraud and no value. Man, I have been talking flat-rate so long I feel like Steve Forbes…! :-) If there is a better solution to end fraud, let’s hear it.

    “They can crush would-be competitors as they rise from the crib.”

    No, I don’t think so. I can create my own parking page and have. All I need is some ads, a feed, an affilite offer, or to find advertisers.

    If you started some kind of service to place ads, do you think YOU would be crushed? Sure, we all hate you because you have so many damn domains, but we love you cuz you’re a good guy. You have NO IDEA how many would jump onboard for something you launched, was seriously involved in, or just approved of…!

  5. Jason says:

    Great inspirational piece Frank. You break down domain names like science. While you only write one article a month, they’re definitely insightful enough to shake up the Internet and the domain name industry like a cyberquake.

    You represent the domain name philosopher of our time. Best of luck on your quest to change the domain name industry and domain parking.

    Peace

    Jason

  6. Uzoma says:

    Just timely as Frank was writing, there’s a major investigation of Google’s search criteria reported here:

    http://www.huffingtonpost.com/2010/09/04/google-search-rankings-in_n_705759.html

  7. LS Morgan says:

    Do we have any legal experts here (as in, someone who has actually graduated from law school) who might be able to offer a non-theoretical, educated comment regarding G being forced to make their SE algo public?

    I’ve always thought that something like this would arise; somewhere out there in the world, a legal case would eventually be brought claiming that G was engaging in untoward practices (probably under some sort of anti-trust guise). This might force their hand in a big way, since the only real way to refute it would be for them to articulate their methodologies- in a very detailed way- into public record, which would be the greatest day in SEO since the advent of the search engine itself. Guys like Wall and Fishkin would be paying Ninjas to plant microphones in the courtoom so they could have that info before the transcripts were made public.

    Of course, this would be a terrible day for the internet since it would effectively hand over search engine nukes to the PPC and affiliate system gamers, while the people out there developing meaningful content would get washed deep into the Google backwaters in a veritable flood of perfectly optimized affiliate stores and PPC splogs.

    The short question is: How long can Google keep their rank arbitration methods a ‘secret’ in the face of suits that claim they’re acting rotten behind closed doors? Are there any sort of mechanisms within the law that might offer some sort of protection to G in a suit like this? Perhaps where they can outline how they go about things in a courtroom setting without jeopardizing their competitive advantage by publicizing their proprietary secrets?

  8. domains says:

    Frank

    Do you care to share with public on what happened with your private advertising box for each site you had? Did yahoo or bing dislike this and made a threat? Take it down or this will happen?

    Wonderful post frank. You made yahoo a lot of cash over the years and you did well. Time to make a change and tell yahoo to go fuck themselves.

    I see your testing things all ready with your houseboatloan.com and a redirect to a one page site.

    Now the million dollar question and traffic conference. Will rick pass out a contract to the big guns, you there and say forget google, bing and let our traffic go to private advertising platform. Google and bing will realize what they did and there mistakes. Wake up and smell the coffee google and bing.

    Frank, Berkens, rick, day and imagine top 100 traffic PPC players how would impact google and bing? I’m guessing a lot of earnings will be missed IMO. Stocks go down the toliet.

    Your PPC parking companies will miss things cause a stir among the friend system

    something big is going down at traffic and wouldn’t shock me if rick and players do something like this.

  9. domains says:

    Of course Kevin ham. Accidentally forgot him

    Millions and millions of uniques a day.

  10. Dow Media says:

    Nice to see you posting/blogging again Frank. A belated Happy Canada Day to you too. – Allan

  11. domain guy says:

    frank your perspective was missed in the domain world.what you are suggesting is the rise of a new biz model for domains. also quantifing the value and scale of type in traffic.
    this could happen with a large company or a new entrant.
    google has overstepped their bounds and the time is ripe for change.
    some serious comprehensive strategy is needed in the domain space.
    someone else who could do something is michael mann when he forecloses on sex.com and implements the new biz model.
    then a few well targeted press releases with the high numbers and money generated then the spotlight focuses on the direct navigatinnindustry.

  12. [...] Schilling published an editorial recently that was well received, even proclaimed to be the most important post of the year. I would [...]

  13. Chris says:

    Is it really true that domain parking is dead? Many people are saying that the opportunity is missed. But my instints are telling that their wrong. Kevin Ham, Yun Ye, and Frank are all inspirations.

  14. domaiers says:

    Frank

    now houseboatloan.com is redirecting to ontau.com?

    hmm..this is getting interesting..

    frank are you attending traffic? have a feeling something big will go down, lol

    if im wrong, im wrong i guess..

  15. domaiers says:

    interesting..now its rotating among ask.com front page and trying other sites..

    frank your the man! cant wait to hear a reply from you and what your testing

  16. doobiebrother says:

    @ LS Morgan who said “Do we have any legal experts here (as in, someone who has actually graduated from law school) who might be able to offer a non-theoretical, educated comment regarding G being forced to make their SE algo public?”

    Maybe you can get Colonel Sanders to reveal the 11 herbs and spices too.

  17. [...] Domain Development, A Flawed Model With Frank Schilling’s recent post predicting “most high quality name traffic will leave it’s present PPC deal looking for something better“ and a conference on domain development happening this week, we found the topic of our [...]