Seven Mile, Uncategorized

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.