Why your business needs a Domain
Taking your business online is now a necessity to keep up with the competition, to do that; you'll need a domain name.
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Choosing the Best Name for You
You've decided that you want to own a domain name. There's just one problem, you're not sure how to choose a good one.
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Direct Navigation
As the Internet matures, the number of potential customers online is growing and with it, the number of ways to promote your business online. More...
Open Exchange
All aspects of an open exchange are about the logistics of information, assets, liabilities and trust. An open exchange is focused on growing the market itself, increasing distribution by stimulating competition, and ensuring that domain stock is available as widely as possible.
Sales Agencies in contrast are by nature very competitive. It is natural for them to concentrate on growing their own market share, eliminating competition and monopolizing on as much domain stock as possible.
Enabling new sources of distribution increases the volume for the whole market. In order to extend marketing reach, the exchange needs to ensure all distribution channels have the tools they require to extend domain aftermarket sales to their customer bases. These tools need to be flexible and easy to use. For the purpose of domain aftermarket sales - every registrar, domain portfolio owner, web designer, small business portal, e-commerce enabler, and marketing portal needs access to selling aftermarket domains as a product.
The two major business functions of an open exchange are:
- Stock control
- Distribution
Although "stock control" sounds innocuous, it requires significant due diligence, data mining, security, and domain intelligence. The core responsibilities include:
- Inventory Management
- Collecting Metadata
- Offering Pricing Guidance
- Validation
- Owner Finances
- Owner Transfers
In order for the domain aftermarket to grow its distribution, a central location of domain stock information needs to be established. A centralized stock control will allow a diverse set of existing and future domain marketers to gain access and effectively market a wide range of domains meeting their internal and consumer expectations. It is essential that marketers have access to a critical mass of domains across all general categories. Even the largest domain portfolio owners lack adequate volumes of domains in certain market segments. Diversity of domain stock availability is a good argument for centralization.
Centralized stock control allows the domain aftermarket to
behave in ways identical to a registry
The stock control feature set needs to include the means to collect a wide range of information related to each domain. This data specifically needs to analyse the domain in a contextual view. Data processing includes collecting data that describes each domain and provides the framework for algorithmic ordering of domains stock. Some criteria include:
- Domain phrase (BedroomFurniture.com = "bedroom furniture"),
- Search volume for the domain phrase
- Associated phrase advertising bids
- Related contextual phrases
- Contextual category assignment
- Location specificity (GeoIP when relevant)
- Length of the domain, word count, hyphens, numbers, grammatical ordering
The nature of an open system is that pricing can not be determined for all domains by one central authority. However, domain pricing plays an integral part in maintaining continuity and integrity of domain reseller networks. For this reason any stock control functionality must include a reference domain price for each domain. This reference domain price is only used to establish a relational description of the domain owners own price. The usefulness of providing a reference domain price is: to offer a recommendation to the domain owners for consideration when pricing their domains; and offer a baseline to the distribution algorithm on how pricing should affect listing order.
It is expected that the listing order algorithm for distribution will take into account the relative negative effect that pricing away from a published standard has on domain sales. This negative effect can then be calculated into the distribution ranking to ensure a price point of maximum productivity is achieved. This method only provides a reference ranking system to ensure increased distribution for domains on offer which are most likely to sell. It is important to note that this system can not be seen to dictate domain prices to domain owners. It call only be used for guidance and distribution preferencing in an open market system.
Validation checks for rightful ownership, trademark infringement, spell checking, and illegal or illicit domains. The purpose of validation is to minimize legal liability and enable ethical practices.
Establishing ownership
Establishing ownership is paramount to making a domain sales transaction viable. Although this service may seem to be an obvious standard, various examples of fraud can be found in existing networks where common domains are offered for sale. As an example Microsoft.com has been found recently for sale on a domain portal website. The only entity that can reliably offer proof of ownership is the hosting registrar that maintains the domain. Whois checks are increasingly difficult to validate.
Trademark vetting
Eliminating the inclusion of trademarks in distribution feeds is important to the development and credibility of the industry. Many mainstream marketers and future distribution partners can not afford the legal or brand damage associated with trademark infringement domain sales. Unlike new registrations, aftermarket domains have a shelf life which establishes that the vetting of illegal or illicit domains is practical and feasible. This causes a difference in the threshold of diligence required for a new registration versus the established existence of a domain for resale.
Unfortunately trademark vetting is impossible to perfect because trademarks are country specific, category specific, and often in conflict with other claimed trademarks. Although only the most obvious trademarks can be consistently eliminated from distributed stock, it is a requirement by many potential channels of distribution to follow a best practice approach.
Mainstream marketers can not afford the brand damage and legal liability
associated with trademark infringement domain sales
Spell Checking
Stock control requires that spell checking be performed. Domains are commonly registered with spelling errors, either intentionally or by accident. However, the resale of domains with spelling or typographical errors cause customer service issues for the sales agents. When considering the cost of buying domains in the aftermarket, reselling domains with these characteristics can cause damage to the resellers brand and charge-backs on credit card transactions.
Legal Conflict
There are a number of domain phrases that have legal connotations when offered for sale. Checks for these illicit and illegal domains are required to ensure compliance with laws and to avoid reseller brand erosion.
Finance
The stock control provider ensures that once a domain transaction is initiated that the valid funds have been received. They hold the funds until the domain has been successfully transferred, as validated by the new owner. The stock controller acts as the seller-side escrow provider.
Transfers
The stock control provider ensures that once a domain transaction is initiated that the transfer of the domain to the buyer is actioned before the seller receives the funds. The stock controller acts as the seller-side transfer control.
Growth is fuelled by distribution. Without increased distribution and aggressive marketing the domain aftermarket will be unable to grow. Most of the current domain sales are generated through reactive domain portals. In order to increase domains sales and valuation increased distribution must be aggressively promoted.
Distribution is about communication between business processes. In an open market multiple business system, the distribution process links most of the other systems together. This communication system must be capable of interacting with a wide variety of distribution partners from diverse segments of online marketing in different formats. The primary responsibilities of this system are to:
- Provide an open distribution system for communicating domain availability and status
- Control the listing algorithm for domains that are distributed
- Filter domain searches to correspond to "hand shake" criteria for each distributor and domain owners.
In contrast to the stock control function of gathering and maintaining domain availability and data as a datacenter, the distribution area of control should manage short term exchange of information and information processing. When a distribution partner (marketing) performs a search query, the distribution center needs to interpret that request contextually based on the search request. The request needs to be transformed into a dataset combining the query, its contextual extrapolation, and the user making the request.
Example
Distribution Data Request -
Search Query = "funeral arrangements"
User Location = Seattle, USA
Associated Phrases = Funeral Homes, Funeral Flowers, Funeral Wreaths, Burial Caskets, Cremations, Cremation Urns, Funeral Gifts, Funeral Insurance, Funeral Arrangements, Christian Funeral, Cemeteries, Funerals, Cremation Jewellery, Cemetery Markers, Sympathy Flowers
An optimal system would then use this data to query stock control for related domains that are available for sale and meet the handshake criteria between domain owners and the sales agent making the request.
Stock Control Lookup -
Search Query = "Funeral Arrangement", "Funeral", "Arrangement" and all associated phrases
Categories Found = Funeral Arrangements, Funeral Services, Funeral Homes, Cremation, and Cemeteries
Sample domains returned = SeattleFuneralArrangements.com, SeattleCemeteries.com, FuneralWreath.com, FuneralMessages.com, FuneralEulogy.com, FuneralCasket.com, CremationOven.com
Once a buyer has expressed interest in a domain for sale, a system needs to put that domain on hold across all marketing channel partners. It also needs to be able to permanently remove the domain from distribution once it has been sold.
The current domain aftermarket has distribution control issues. Individual marketers all handle domain stock uniquely within their own networks. When a domain has been put on hold or sold in one system, it may still appear for sale in other distribution systems. With the increasing number of distribution opportunities arising it has become a much larger problem to manage stock availability across all partners.
This inconsistency causes a significant amount of labour for a domain owner (or domain broker) that has made a sale. It can also lead to lawsuits if the owner has committed to the sale of a domain in two separate sales systems that fail to communicate.
Domain stock must be ranked using an algorithm which takes into consideration relevance, expected rate of sale and net commission to the lead generator. The distribution process utilizes the data that is gathered by the stock control center to calculate the optimal set of domains and the order that they should be displayed by marketers.
Rate of Sale
The strongest factor that influences the ranking of domains (giving them greater opportunity of distribution) is the rate of sale. The rate of sale is not a simple calculation; it depends on a myriad of factors that must be considered individually. Some of the factors are discussed as follows.
Price
Price affects the rate of sale when considered in the light of buyer expectation. The further away that the listed price is from what the user expects will detrimentally cause a reduction in the rate of sale. This reduction is best calculated by first determining the historical price of what other similar domains have been sold, and then including in the ordering algorithm a calculation compensating for the reduction in rate of sale. This calculation should be based on the number of standard deviations away from the historical price that the domains listed price is offering.
Example: HoustonHomes.com for $2,300 is more likely to be aligned with the user's expectation of purchase than MySuperHomesForSale.com at $2,300. The second should be demoted in the listing algorithm as it has little apparent value in comparison to its asking price.
Price affects the rate of sale when considered in the light of buyer expectation
Geography
Most traditional SME businesses are land based and therefore geographically sensitive. A plumber in Denver Colorado USA does not need to own Plumbers.com in order to be successful on the Internet. In most cases having a more specific domain that is relevant to their potential customer base is more beneficial, for example DenverPlumbers.com. There are a lot of geographically based domains which may be available for sale in the aftermarket. The geographic relevance can be established by identifying the GeoIP location of the potential buyer and cross referencing it with domains that have location specific connotations. Each location domain needs to have a GeoIP reference assigned to it and by calculating these GeoIP associations location specific domains should be given preference and ranked by how close they are to the user. The rate of sale for location specific domains can be calculated to preference the ordering according to calculated buying behaviour. This is regardless whether that behaviour is positive or negative depending on the associated proximities.
Example: If someone searches for "winery" and the user is located in Portland, Oregon USA, the results should contain domains like PortlandWinery.com or OregonWineries.com, but should not include NewYorkBeer.com. Ranking should occur when there are domains with a close proximity but a demotion in value should reduce order preference when location specific domains are geographically distant.
The geographic location of a user offers an additional parameter to preference
domains for resale close to their location, while excluding domains at a distance
Contextual
It is not enough to decide that phrases are loosely related. To determine the rate of sale a relevance index to the search phrase must be calculated. This factor can then be used to influence the ordering of domains displayed. An example of this is the difference between a user requesting "canoe trips" and "canoes". The first is more likely to be looking for adventure travel or camping domains, whilst the other is searching for canoe product domains. Although subtle, the difference can influence the rate of sale and needs to be included in the algorithm.
Visual
Visual factors for domains include things like:
- Domain length
- Number of words
- Extension
- Use of numbers and hyphens
- Word order
- Grammar
Each of these factors will have different rates of sale comparative to other factors in the same class. All of these factors must be included for an ordering process to be efficient.
Profit
Profit is calculated for the marketer only. The domain owners profit should not influence the ordering process. The purpose of the ordering process is to convert user interest (traffic generated by the marketer) into the maximum profit for the marketer but not particularly for the domain owner. This encourages the marketer to make more sales. Profit is calculated as:
Marketing Traffic Volume * Rate of Sale * Domain Price * Market Commission= Gross Profit
Ordering domains by potential profit to the lead generator increases domain distribution (exposure) for domains that have higher rates of sale, acceptable domain market prices, and favourable commissions for the marketer. This offers the greatest incentive to sell more domains and reinvest in marketing expansion.
Distribution is about communication between marketers, stock control and domain owners. Domain owners need the ability to communicate what they want out of each domain sale to the market and the data center needs to store the domain owner's criteria for each domain. The marketers need to be able to choose domain stock to sell and negotiate what their commissions will be for each domain sale. The marketers also need the ability to utilize the distribution center to select domains based on rate of sale, sale price and contextual relevance. Most of all, distribution is about clearly and correctly communicating what is currently available in real-time.
Marketers offer to sell domains based on certain criteria. They consider the domains on offer and accept to promote those that meet their criteria. Hand Shake agreements are the union of the domain owner and distribution partners criteria for sale. This union describes in what cases various domain owners and distributors agree that they should work together to sell individual domains.
Handshake Agreements Model (PDF)
Domains that do not meet the marketer's criteria are simply not marketed. Domains that are more profitable for the marketer create strong incentives to pursue new channels of distribution and increase volume. Increased volume and profitability for marketers lead to more competition and buyer awareness, which in turn leads to higher domain prices. Higher domain valuations and revenue created by selling domains actively can drastically improve domain portfolio valuation. If a true open market can be created and utilized, everyone benefits.