Direct Navigation

Direct Navigation and the Advertising Market

Direct Navigation has led to a multimillion-dollar business that combines advances in online advertising with the knowledge that Direct Navigation users will not always find the content they are looking for. Pay-per-click (PPC) advertising is a business model that was created in response to the vast revenue potential offered by the Direct Navigation market. PPC and recycled advertising refers to the process whereby Internet giants such as Google and Yahoo! serve ads to millions of sites ranging from legitimate sites, which offer content and advertisements, to sites that display ads and little other content. Companies originally purchase these ads to be placed on the Google and Yahoo! sites, and they are then used in ad services available through the search engines. When an Internet user clicks on one of the ads, the company that placed the original ad is charged a click fee, while the domain owner and any partners receive a commission.

The impact of such click fees on the corporations submitting the advertisements is substantial. Spending for online advertising is steadily increasing and is estimated to reach $29 billion by 2010 in the U.S. alone.⁷ The money corporations spend on each click is often shared between the provider of the advertisement and the owner of the site where the advertisement is served. This means that serving advertisements on PPC sites can be a very effective and lucrative means of utilizing a domain name. It is FairWinds’ experience that click-through rates of users who land on a site via Direct Navigation are high, and range from 20 percent to 50 percent based on the site category.

PPC and recycled advertising affect users of Direct Navigation through domain parking, which refers to the practice of hosting a page of advertisements or other temporary content on a Web site that does not yet have content. Domain name owners and advertisers use domain parking to monetize Direct Navigation either temporarily, until content is posted, or permanently. The increase in profitability from domain parking has led to an increase in PPC monetization.

Figure 2 depicts how PPC sites work and how users interact with these sites. This figure was provided by CADNA, a coalition of brand owners who are opposed to abuses of the domain name system. FairWinds is a founding member of CADNA and runs the coalition on a day-to-day basis.

Figure 2: Pay-Per-Click [+]

PPC advertisements are able to offer content based on the domain name itself, providing users with the ability to click through to the content they were looking for as opposed to trying a different domain name. Because users are able to reach what they are looking for, PPC sites are able to sustain profitable click rates. However, this is problematic for brand owners because consumers may reach their brands indirectly, and this traffic generates revenue for cybersquatters. Brands wishing to leverage the strength of a generic that have not sponsored ads with the ad host will not be visible to customers searching for products or services. In the case of brand names and trademarks, the brand is charged each time a user clicks through a PPC advertisement to reach their intended content. Maintaining a portfolio of strategic domain names can help companies both in terms of branding and advertising cost savings.

In addition to PPC advertisements, domain name monetization also utilizes pay-per-lead (PPL) and cost-per-action (CPA) strategies. PPL enables an advertiser to receive membership or advertising services in return for paying for each sales lead received from the marketing venue used. CPA is a marketing pricing scheme that only charges a fee when a certain action associated with an advertisement is performed. Actions that qualify as CPA might include a product being purchased or a form being filled out. CPA allows companies placing advertisements to pay only when they receive a specific result. They are able to advertise without any cost unless they are also gaining the benefits they are looking for.

< previous page | next page >