Google is rumored to be ending the monetization of controversial but lucrative practice known as domain tasting by ceasing to provide AdWords inventory to domains that are less than five days old. The move would place severe restrictions on the ability of a growing number of publishers to take advantage of the five-day grace period registrars grant domain buyers before registration fees are billed. Publishers use this time test the traffic-drawing potential of new domain names. Google cutting the flow of funds to the millions of burn and churn â€œmade-for-AdSenseâ€ sites will ripple through the search marketing sector producing (mostly) positive change.Â Change always comes at a price.
Hereâ€™s how the practice works. A domainer is a person who acquires a portfolio of domain names. The value of properties in the portfolio is determined by the traffic each draws. Domain registrars give a five-day grace period during registration domain name so buyers can test the marketability of the domains before purchase. Most use the grace period to determine traffic numbers but an increasing number of publishers use those five-days to post throw-away pages laden with AdWords advertising. This way, they monetize their research, keep the domains that convert and delete those that donâ€™t.
The practice produces a lot of money for everyone involved. According to a post by Jay Westerdal at DomainTools Blog, â€œThe result is the ability to produce millions of temporary websites that literally generate millions of dollars in income per week for Google. It was disclosed in court that one partner that Google had was generating as much as $3 million dollars a month from the practice and that was after Googleâ€™s revenue share.â€
Though it generates a lot of revenues domain tasting drives down the value of AdWords advertising for legitimate publishers by lowering ad bid prices. Knowing many of the clicks on their ads come from taste-test domains; advertisers are unmotivated to bid higher for each click. Improve the quality of each click and quantity of inventory distributed to legit publishers and the cost per click bid prices should raise accordingly.
For such a ban to be fully effective, Yahoo Search Marketing and other bid-per-click advertising networks would also have to stop serving inventory to grace-period domains. Westerdal believes they will, if only because monetizing taste-test domains could be considered an act of forgery, a tactic several trademark lawyers have taken in their fight against faux-domains.Â According to Westerdal, several large advertisers including Dell, BMW and even Yahoo, â€œâ€¦have all filed lawsuits in the last two months that ask for millions of dollars of damage from Google partnersâ€¦â€ over the practice, which they call Domain Kiting.
The phrase Domain Kiting was first coined by GoDaddy CEO Bob Parsons in May 2006. In an impassioned post to the GoDaddy HotPoints Blog, Parsons clearly outlined how some domainers repeatedly recycle domains through the five day grace period, rarely paying for the bulk of domains registered in their names. A statistic he mentions (again, from spring 2006) suggests of 35 million domain names registered in April 2006, 32 million were part of a domain kiting scheme. Thatâ€™s over 90%! Parsons is careful to note that GoDaddy and its affiliates do not take advantage of the enormous loophole the ICAAN registration system allows. He did however drop a few names of companies that do.
In the search engine marketing sector, this change in Google policy would have wide ranging effects. Many of independent search marketers, those working solely for themselves, would see an immediate decrease in monthly revenues. So would many of the largest and wealthiest domainers and unscrupulous domain registrars. That means the current Internet economy changes a little bit. Actually, given the numbers involved, it means a fairly significant change. The days of low-cost hosting, for instance, might be limited as several domain hosting services have been subsidized by various domain kiting schemes.
At the same time however, search marketing agencies and PPC advertisers should see a far cleaner playing field to work with. A larger amount of inventory distributed across better quality sites should improve click through rates at higher bidded prices. That in turn will benefit the vast majority of legitimate content publishers who rely on AdSense revenues to monetize their websites.
If Google really does cut-off AdWords inventory to domains that are within the five-day grace period, they will be taking a huge step towards cleaning up one of the few remaining major problems with their ad-network while vastly improving user and advertiser experience on the Web. Letâ€™s hope they do and that the other networks follow suit.