The Wall Street Journal reports today on the “legitimization” of the domain name industry. Specifically, that the monetization of domains names through contextual PPC (pay per click) advertising systems has allowed investors to ” … see the Web addresses as long-term investments that yield a steady stream of income for shareholders”. The article refers to the aggregation of domains in large portfolios and the notable investments by Marchex Inc. (Name Development) and Highland Capital (BuyDomains) but ends with the warning that:
Firms focused on advertising-related domains face some risks, said Ms. Wolk, the Susquehanna Financial Group analyst. Advertisers, largely unaware of where all their search ads appear, may decide they don’t want to be affiliated with such sites. In addition, some consumers may be turned off by the barrage of ads. A user looking for information could be frustrated when they “instead find ads that point them to other sites to look at,” Ms. Wolk said.
Note: Studies have shown that contextual advertising CTR and ROI is significantly better for advertisors when PPC advertisements are displayed on pages where the user has initiated a search (i.e. Google’s main search page) rather than publisher’s content pages (i.e. Adsense). How direct navigation fits into the equation is still an open question.
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