“We believe there is a clear shift occurring in the marketplace,” DomainSponsor says in its announcement. “In order to better respond to these market forces, DomainSponsor has begun transitioning into more of a pure performance-based model for traffic that ties publisher payouts to conversions for advertisers. CPC (cost per click) is not going away, but advertisers know that clicks on the same keyword from different domains do not convert the same.”
Early feedback from domain owners has been mixed. A poll on the DomainState forum found a minority of DomainSponsor publishers reporting increased revenue. Of the remainder, many said their revenue had declined 50 percent or more.
Some domain portfolio owners said they would switch from DomainSponsor to other services. A key question is whether the trend is being driven by policy changes at Google and Yahoo rather than individual parking services. Google’s emphasis on ad quality is clearly seen in this week’s blockbuster earnings report, as improved targeting led to higher prices on many keywords. “We make quality improvements to our advertising network,” Google CEO Eric Schmidt told Bloomberg News. “When you improve the quality, that ad is worth more money.”
One possibility is that domain parking will evolve into a two-tier industry, with services specializing in either pay-per-click or a per sale model, known in the industry as pay-per-action. DomainSponsor is being merged with Revenue.net, a related pay-per-action affiliate network. Two other large traffic monetization services, Fabulous and Sedo, are also owned by companies that operate pay-per-action affiliate networks.
A wholesale shift to pay-per-action could have broad ramifications for the domain advertising industry, which has had huge growth due to speculative domain buying and moves by registrars and web hosts to display pay-per-click advertising instead of house ads. It could also affect pricing in the secondary domain market, where prices are often supported by a name’s potential to generate pay-per-click revenue.