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Squatting Online May Bring In Big Money

(By Lucas Roze)

As blogged about before by David, the domain name business is a big part of this second wave of the Internet boom. People, as well as businesses, have renewed interest in gambling to find the next desired domain name. Although most people simply cybersquate on the page and retain ownership, others have profited from generic sounding names (i.e., http://www.losangelesvacation.com/) to produce relevant advertising that could ultimately generate revenue through clicks on the page.

Seattle Companies such as Maveron LLC (outfit from funded by Starbucks Chairman Howard Schultz 7.6 million) now own upwards of 400’000 unique domain names. Outside venture capitalist seem to be the driving force behind the majority of these successful types of companies. Massive investments in these companies were and are being made to yield high returns. The most staggering are recent investment to Demand Media ($120 million from investors) and Marchex Inc. (raised 164.2 million to acquire Name Development, etc.). These companies and many others alike, are trying to build their very own domain name empires in hopes to draw advertising interest by generating clicks. And the beauty of these sites are that they are pretty much self sufficient. But is it worth it?

RBC Capital Markets stated that direct navigation sites generate roughly $150 million in revenue per quarter. You’re looking at 7.5% of the total advertising pie (total search engine ad revenue per quarter, averaging $2 billion). Furthermore, it would be safe to assume that these numbers are running parallel in an upwards slopping trend (as advertising online is growing).

This should stay true to the mix for a while yet, but the uncertainties of the web and human behaviour cannot guarantee that searching habits will not change. If by chance traditional URL searches would become irrelevant to the Internet user, many domain name investments would be worth about as much as an Enron stock. 

By IC-Academy | May 24, 2006 | E-Advertising , News & Trends

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