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The "Parked Domain Monetization" Business

Joi Ito

I think that a large number of people buying domains can't get their first choice name because some "parked domain monetization" operation (cyber-squatter) owns it and is making money running ads on the page. The trick is to sign up for millions of domain names; set up pages and run ads on them; after 1 day delete domains that have no traffic; after 3 days delete names that have some traffic; after 5 days delete pages with marginal traffic; keep the 1% of pages that have enough traffic to be worth keeping the domain. Because of the refund policy, the 99% of pages deleted before the 5 day grace period are refunded in full and the "monetizer" gets to keep the ad revenue generated over those 5 days. (This is called "domain tasting".) See the DNForum page for more information on how this business works. Interestingly, I think Google AdSense probably has boosted the viability of this business. I wonder what percentage of Google's posted $2bn (or so) / yr "traffic acquisition costs" goes to this business. According to Ram Mohan from Afilias, 3 of the big 5 registrars say that they make over $5m-$8m / year from parked domain monetization pages. This means that these people are making more than that from these pages and Google and other ad servers even more.

I wonder if there is any way to close this loophole that effectively enables a no-risk business. I think these monetization businesses are a net-negative value to the community and seems like a loophole exploit. On the other hand, refunds are a legitimate service for legitimate registrants. It is VERY difficult to tell the difference between a legitimate and illegitimate registrant.

In the jungle of such pages, the Kevin Kelly page stands out as my favorite example of responsible domain name use.

WSJ November 17, 2005: "Revenue from text ads on these sites will total $400 million to $600 million world-wide this year and may reach $1 billion by 2007, according to Susquehanna Financial Group analysts Marianne Wolk and Roxane Previty, who track the online ad industry."

Update:
Investigating parked domain monetization
Parked Domain Monetization (ICANNWiki)

By Joi Ito
Related topics: DNS, Domain Names, ICANN
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Re: The "Parked Domain Monetization" Business Roger Williams  –  Dec 01, 2005 4:36 PM PST

In the face of problems like ICANN and Verisign I think that this is a non-topic. Parked Domain Monitization is a useful product as it fills the gap where 'legitamite' businesses had failed to set up their signpost on the web. If these domains are getting traffic but are not registered then someone SHOULD register them, and why is it so bad to make some cash from this?

The argument that people cannot find the domain that they want because of this seems weak. Hasnt it been proven that keyword domain names, which is what most of these 'squatters' are registering, are in fact poor names to try and create a brand on?

Lets stay focused on the real problems facing the Internet and not the Free Enterprise aspect of it. If anything we need to make sure that this aspect is protected and maintained!

Re: The "Parked Domain Monetization" Business Roger Collins  –  Dec 06, 2005 1:03 PM PST

There are too many registrars competing to taste domains, and too much expense involved in operating a delete-competitive registrar to call it free. Theoretically, they will continue to compete on technology driving up their costs. Free or not, it seems you object to speculating so I'll comment on that.

I admit to being envious of successful speculators myself. They get rich for seemingly doing nothing. They just got lucky. They were in the right place at the right time. So, it is hard to defend them, but economics defends them well. Having a domain be taken by someone who wants to profit from it is not the worst thing that can happen to a domain name. As a domain name broker, I know that the most reasonable sellers are the ones in the business for profit. Offer them a decent multiple over the PPC revenue and they'll sell. The non-professional is more likely than the professional to horde the property.

We also have to remember that the free market rewards speculators for a reason.  They buy and save their domains in the hope that they will later be in the position to help some less-forward-thinking person use the domain for a valuable purpose. That might be better for the Internet, too, than another 6th-grader's free wiki on fart jokes.

Speaking of wiki's and speculation.  Here's a balanced perspective on the economics of speculating: http://en.wikipedia.org/wiki/Speculation

Re: The "Parked Domain Monetization" Business fnord  –  Dec 06, 2005 8:58 PM PST

First off,

some “parked domain monetization” operation (cyber-squatter)

This is a very liberal interpretation of the term cybersquatter. It originally meant those who registered madonna.com or whatever and more or less held the domain for ransom in case some material girl thought it was properly part of her material. That is not what is going on with domain monetization in most cases (there are some cases where domains are inadvertently dropped and held for ransom).

Second,

I wonder if there is any way to close this loophole that effectively enables a no-risk business. I think these monetization businesses are a net-negative value to the community and seems like a loophole exploit.

As the domains so used are largely previously owned domains, I agree. I happen to think that any expiring domain should be shelved for a few years before being made available again for the simple reason that it is otherwise a questionable address. I wrote why here over four years ago so this process is hardly news. Indeed Yun Ye of Ultimate Search was doing essentially the same thing going back at least 7 years. The namespace is so awash with drek that I can't see whether some parked page is making money or not is a burning issue. And the question of why domain names are reissued at all has never been answered, and rarely asked but by a few. -g

Re: The "Parked Domain Monetization" Business Michele Neylon  –  Dec 07, 2005 5:35 PM PST

It's a very sticky issue.
We probably all have clients who speculate in domain "monetisation" and considering that .eu was launched today it is a very topical point.
If you look at some of the current entries in the queue you can find many valid trademark holders, but also a lot of dubious looking registrations.
Of course whether they are dubious or not is a moot point.
As others have pointed out, it's not as "black and white" as cybersquatting in the "hold to ransom" sense, but from the perspective of a "valid" user it can be very frustrating. Having said that you can also argue that it is the up to the company or individual to "protect" their space online. If they don't take preventative action they may not have anyone to blame but themselves.

Re: The "Parked Domain Monetization" Business Tom Cross  –  Dec 15, 2005 10:09 PM PST

Wow, certainly some vested interests commenting here.

The "monetization" scam has reached a point where it is exceedingly difficult to come up with a name for any new project or company which needs to use the Internet. That is, unless you're wealthy. In the United States people are still fairly uncomfortable with domain names that don't end in "dot com," because nearly all of the websites they deal with are in this tld. Having been a "dot net" for several years I regularly found myself having to correct even Internet savvy people that I really mean "dot net" and not "dot com."

Nearly every reasonable, simple combination of english words is registered in "dot com" as well as most of the other non country tlds, frequently by squatters. The price for these domains starts at $500 and ranges up to $10,000+. To call those prices a "a decent multiple over the PPC revenue" is the understatement of the year!

The end result is that one must spend weeks screwing around with names for any new project until you crack a combination that is both reasonable and available. The alternative is to be prepared to accept a significant built in cost in order to get your project off the ground. For certain kinds of websites this cost is prohibitive.

In the realm of trademark law 20 years ago, if you aren't using it, you don't own it. The reality today is that if you aren't on the Internet, you don't exist, and so the new trademark law is somebody else owns it and if you want to use it you'll need to pay whatever price they demand.

A scam is something that generates revenue without providing value.

The idea that ad pages and phoney search engines put up by squatters constitute "providing value" is silly. They are designed to drive an extremely small group of people who don't understand the web toward advertisements by tricking them into thinking they are going to find what they are really trying to look for. The incidental revenue provided by a particular domain due to these victims is almost negligable. I would MUCH rather see a group of 6th graders using one of these domains to chat about nonsense with eachother and, perhaps, actually enjoy the Internet as a communications tool, then to see them locked out by this corrupt practice.

This is why artificial scarcity sucks, and why we need DNS policy that seeks to minimize it rather then create it. However, before that question can be addressed we must first come to an agreement that this is, in fact, a scam, and it does actually hurt the quality of the Internet.

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Promoted Post

Buying or Selling IPv4 Addresses?

Watch this video to discover how ACCELR/8, a transformative trading platform developed by industry veterans Marc Lindsey and Janine Goodman, enables organizations to buy or sell IPv4 blocks as small as /20s.