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Friday, February 03, 2006

Advertiser IQ Test

When I see advertisers show up on parked domains and other questionable content placements, I sometimes wonder about their sanity.

I'm not one to completely reject content, nor parked domains, as a potential source of cost-effective leads.

But consider this scenario. On a fairly expensive keyword, I see an advertisement in the very top ad placement on Google - in the premium spot, with a blue background. Knowing approximately what advertisers are paying in that space, I project their cost for that click to be at least $1.50.

The ad takes you not to an advertiser, but to a parked domain page, which itself shows ads. The advertiser, then, owns the domain, and is partnered with the company that is placing the ads. Let's say they get 70% of the revenue, and the ad server gets 30%. (By the way, it isn't Google Domainsense serving the sponsored listings on the parked domain in this case, it's Overture. So we're talking about a fairly standard and well-known gambit here -- the "click arbitrage" play where a publisher buys clicks "low" on Google and sells them "higher" as an Overture content network participant. Whee! Some have called this "click pimping." In this case, I'll agree with the pejorative term. It's a frickin parked domain, after all.)

My first concern, of course, is to doubt that all the clicks on the content listings can be legit. How can a biz that just takes you to a parked domain be making enough money on its own merits to outbid all the legitimate businesses who are using AdWords to actually promote a real business? If that were the case, then wouldn't all the ad space near Google SERP's be filled with ads that merely took visitors to parked domains with more ad listings on 'em? Now wouldn't that be fun!

Moving on. Back to the math. Let's say it was $1.50 to get them to the page of content with the sponsored links on it. Now you must make $1.50 back. Assuming a 70% revenue share, that means -- assuming a conversion rate from click to click of 100% (pretty big assumption but whatever) -- that means the average advertiser on that page of content is paying $2.14 per click. That's $2.14 per click for confused clicks, low-quality clicks, fake clicks, etc. Is it worth it? Could conversion rates from this particular traffic possibly justify this CPC? Well... only if conversion rates from a parked domain page were actually higher than the Google SERP page... since these advertisers aren't showing up on Google for the query in question.

So are these advertisers confused? Lazy? Insane? Stupid? "Aggressive"?

Maybe these kinds of listings -- the really high-cost parked domain listings -- do convert to leads. But it raises a number of questions. Because after all, wouldn't it make more sense to just put your ad in front of people searching on Google?

Posted by Andrew Goodman




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