Despite the significant traffic that comes from typed-in domain names, the public harumphing and clucking about type-in traffic is climbing in volume as it becomes clear how much money is involved. Articles this week show that domain names, and the people who make money on them, are making some commentators uncomfortable.

There are three ways to get to a web site.

• You find something in a search engine
• You follow a link from another site
• You type in a URL in your browser box (a.k.a. direct navigation)

The third method, typing a name in, has engendered a very lucrative niche of the domain name industry, and it flourishes in partnership with Google and Yahoo! Within the domain name industry, it’s called the PPC market (see slides 9 & 10 in Sarah Langstone’s excellent presentation); the people who do it call themselves domainers.

It works this way: A user types a domain name into the broswer box, and a web page is served up, full of contextual ads (except that there usually isn’t any context, just ads). Each time a user clicks on an ad, Google gets some money and the owner of the web site (usually the domain name owner) gets some money. So domainers register or buy names that people type in, and if they make more than they pay to a registrar (about $6.25 each at volume quantities), they’re in the money. It works so well that millions of names have been registered for this purpose, and domain portfolios numbering in the hundreds of thousands have been sold for hundreds of millions. Google and Yahoo! love it—see the sponsors of the Traffic 2006 conference, where they’re selling out at $2000 a seat.

Public harumphing and clucking has accompanied the rise of this ingeniously simple way of raking in advertising cash, which has (surprise!) begun to gain wildly in popularity. It’s always annoying to find that someone has found a way to make a lot of money easily.

The grumbling comes in three forms this week:

• Domain names are dumb and don’t work
• Making money this way is dirty
• People who do this are just a bunch of cybersquatters

Domain Names are Dumb

One Tim Anderson writes that Domain Names Are So Last Year, magnanimously speaking for that mythical beast, the “Internet User” (emphases mine):

Domain names are increasingly unimportant and of little interest to most users... [A] high ranking on search engines is worth a great deal more than most domain names… The keyword concept… is flawed. It is flawed as a marketing concept because customers want a choice of sites when searching. It is flawed as a naming concept because there are not enough words in the language to provide a unique identification for every site. Search does both of these things better.

I wonder which unflawed marketing concept would ignore the 15% of web traffic coming from direct navigation to domain names? Or the fact that com gained two million domain names the last month alone? Perhaps Mr. Anderson doesn’t understand “most users”, or what “customers want”, as well as he thinks he does.

The monetization of domain names is “shabby”

John Battelle, an intelligent and interesting man (I know because my ultra-wonderful sister knows him and says so), wonders if purchasing domain names to profit from type-in traffic isn’t “shabby.” Mr. Battelle was reacting to the purchase of NameDevelopment by Marchex for $160 million last year about this time. NameDevelopment owned 200,000 domain names and was reporting 17 million unique visitors.

Directing people who type in keywords to pages where they are shown relevant ads served up by Google. Sound familiar? Yes, back of the room? Correct, that’s Google’s business model! The difference is that NameDevelopment’s pages don’t feature an ever-shrinking region of natural search results.

It’s interesting to me that domain names are often singled out as the playground of the reprehensible. What about the intersection of the Internet with the movie business, or even more to the point, the music business? “Shabby” hardly begins to describe these twin gutters of corruption and sleaze, but no-one is questioning that activity, on moral grounds at least. It’s not as if search isn’t full of questionable businesses either.

And how is Marchex doing since it got into the business? Well, an analyst’s report (.5 MB PDF) rates them as a strong buy, ready to “outperform.” And the report notes that Marchex is moving to upgrade many of its pages into better sites with real content. Others have warned that Marchex is gaming the system by acting as an arbitrageur between advertiser price spreads, and has purchased puts on the stock.

In any case, it’s getting clearer to me that the results page, whether from a search or a domain name, is in itself a publication that people read. Pay-Per-Click pages are just the low-brow variety, and it’s always been distressing to some people that people read low-brow publications.

Mr. Battelle’s concerns seem honest, but quite patronizing. As does ICANN Board members Joi Ito’s comments equating domainers with cybersquatters, and another (later) note where he says it’s a “complex issue and I’ve decided to suspend judgment”. He wants to differentiate people who “use” their domains from people who “buy” domains as their primary business. In order to… what? Sanction them? Penalize them? What am I missing?

Domainers are cybersquatters

Ryan Naraine writes about tech matters for eWeek. His lastest articles, MS Research: Typo-Squatters Are Gaming Google and Typosquatters Target Anti-Virus Vendors might lead you to think he was an expert on typosquatters (someone who registers misspellings of a brand name to profit from the typed-in traffic). Here’s what they do:

...unknown typosquatters operating out of Panama have registered more than 150 domain names with slight—almost unnoticeable—variations of the target URL. For example, instead of the legitimate www.f-secure.com the domains “www-f-secure.com” and “wwwf-secure.com” have been registered and set up to point to “nortpnantivirus.com,” which is a misspelling of Symantec Corp.‘s Norton AntiVirus… [S]everal other high-profile anti-vendors like McAfee Inc., Panda Software Inc., Sendmail Inc. and BitDefender are also being targeted.

Very commonly, unjustly, “domainers”, “cybersquatters”, and “typosquatters” are all lumped together. Although some undoubtedly began by registering other people’s brand names, the domainers I’ve talked to say they’re just not interested in branded names because of the legal expense and the threat to their legitimate business of registering generic names that people type in naturally. Given the legitimate profits available, that rings true to me.

But here’s the one question that begs to be asked. The one that Mr. Naraine ought to ask of those chasing the typosquatters. The one every company ought to ask of themselves:

Why aren’t companies registering these misspellings themselves?

If cloak-and-dagger operatives in Panama can make money on misspellings of a brand name, why can’t the company itself? If people are looking for www.f-secure.com and type in “www-f-secure.com”, why isn’t Symantec rushing to register those names themselves? Don’t they want the traffic?

It would be the first time I’ve heard the argument that companies only want literate, educated, non-misspelling types to buy their products. Apparently what’s wrong with domain names is that they are somehow dirty. What’s up with that?