Domain Pay-Per-Click Services Growing Rapidly

The secret to one of the Internet's fastest-growing businesses can be found on a web server operated by Oversee.net, a little-known Los Angeles Internet marketing company. That single server houses more than 500K hostnames, all bearing web pages filled with pay-per-click advertisements from Google and Yahoo Search Marketing, and generating revenue for the owners of those domains.

Oversee operates Domain Sponsor, one of the largest players in the domain monetization industry. These services place pay-per-click ads on parked domains, optimize the sites to attract traffic, and split the resulting ad revenue with the domain owner. Their success has helped the domain resale market evolve from a speculative venture into an industry with a defined business model, which is now attracting considerable interest from venture capital firms.

Domain parking services use advanced analytics for ad matching and traffic building, and are efficient in their use of web hosting, packing thousands of domains on their servers. These operations have helped solidify the statistical leadership of open source hosting platforms, as nearly all are served by Apache web servers running on either Linux or FreeBSD.

Monetization services with a substantial presence at commercial hosts include Sedo, which hosts at least 273K hostnames at 1&1 Internet, and RentalQueue, which has 243K hostnames spread between Sago Networks and The Planet.

The host with the largest concentration of parked pay-per-click domains, strangely enough, is probably SAVVIS Communications, which is best known as a provider of high-end managed services for Wall Street firms. SAVVIS hosts a total of 730K hostnames, of which 548K reside on just 10 servers. Many of those domains are being monetized by Dark Blue Sea, an Australian company whose Fabulous.com service provides pay-per-click services for 600K domains.

Dark Blue Sea also owns 400K domains for its own portfolio, which places it among the eight players who own at least 100K domains. Another 15 companies or individuals own between 10K and 99.99K domains, according to Dark Blue Sea, while 76 more own between 1K and 9.9K names. "Internet domain marketing is largely made up of 100 people who collectively own 2.2 million .com domains," the company says.

One of those portfolios, owned by a mysterious Hong Kong investor known within the industry as UltSearch, was bought for $164 million last year by Marchex, Inc, a Seattle-based Internet marketing firm. At the time of the sale, the 100K-domain UltSearch portfolio reportedly received 17 million visits per month. Interest in the domain industry has surged in the wake of the Marchex deal, with accelerated growth in first-time domain purchases and higher prices in the resale market.

Venture capital firms are among those buying up domain name "real estate". Internet REIT says it will invest at least $250 million in domains, while VC firm Highland Capital Partners has attended recent domain industry conferences.

Some domain speculators are using the five-day grace period for new domains to "test-drive" a name's potential for pay-per-click revenue. VeriSign CEO Stratton Sclavos reports that each week up to 250K domain names are registered and then deleted within the five-day grace period by domain monetizers. Some registrars have discussed implementing a 25-cent deletion fee to discourage this practice.

The Netcraft Hosting Provider Server Count identifies servers used for bulk and registry hosting, as well as those being used for shared hosting and dedicated servers. The dataset is useful to hosting providers for competitive analysis, mergers and acquisitions, identifying international markets for organic expansion, and also to any organization selling to the hosting industry.