Arbitrage Defined

Here’s an interesting blog post that I read about the making money from your domain using PPC arbitrage.

The was orginally posted at MarketingPilgrim.com

Arbitrage is a hot topic these days. American Heritage Dictionary defines arbitrage as “The purchase of securities on one market for immediate resale on another market in order to profit from a price discrepancy. ”A YouTube video titled Adwords Abuse which was uploaded back in April has begun re-circulating. The video highlights some of the issues surrounding arbitrage but it only discusses one form of the problem. Arbitrage is not a one size fits all practice.

So let’s look at the different types of arbitrage.

PPC / Adsense Arbitrage 1.0
A website or web page which contains no content. The page is filled with PPC ads such as Adsense or Yahoo Search Partner Ads. This is the most blatant form of Arbitrage and the one the majority of people are talking about.

    

Arbitrage 2.0
A web page that contains some form of content but who’s true purpose is to generate clicks on the ads within the page. These ads are mostly Adsense with some YPN Ads mixed in. They are Made For Adsense (MFA) sites relying on PPC traffic instead of organic.

Shopping Engine Arbitrage
A web page that lists product prices enabling customers to see the same product priced at multiple stores. They then send the consumer to the merchant’s product pages via PPC links or affiliate links.

Affiliate Arbitrage
Affiliate marketing is a form of CPA arbitrage. The landing page for the affiliate marketer is designed to cause some form of action which the marketer gets paid for whether it happens directly on the landing page or happens when the consumer clicks through to the merchants website.

User Experience
So what does all this mean? Arbitrage isn’t going anywhere. It has always existed and it always will in some form or another. That said, Google, Yahoo & MSN need to get a handle on the situation and enforce the rules they have already set out. All three are explicit that landing pages should contain relevant and meaningful content.

It’s up for debate how shopping, affiliate, and version 2.0 arbitrage fall within these guidelines. How on the other hand they have not already started banning arbitrage 1.0 sites just blows my mind. I get the feeling they are afraid to lose the revenue. What they fail to realize is the work around has already been invented. As soon as all the arbitrage 1.0 sites are banned, arbitrage 2.0 sites will just pop up in their place. If any money is lost, it will only be for the short term.

So what then is accomplished? A better user experience. While MFA sites appearing in the sponsored results may not be the perfect solution, it is still 10 times better than then arbitrage 1.0 junk that is appearing now.

10 Tips For Buying Domains on EBay

There are bargains to be had buying domain names on EBay.  I buy a few every week and bid on lots more.  Here’s a few tips for a successful domain buying experience on EBay. 

1. Know the Value of What Are Buying

There are lots of resources on the internet to check the value of domains. If you are buying 3 character domains 3character.com provides a price guide each month. Another great source of historical price data is EBay itself. At EBay.com click on Buy tab. In the search box type in ‘domain names’ and click on the Search button. The brings up the following navigation:

Computers & Networking > Other Hardware & Services > Domain Names > .com

Click on the Domain Names link to get a list of all domain names. Now click on the Advanced Search link. Then next page click on the checkbox near the top that says “Completed Listings Only” and ensure that the ‘In this Category’ pick list reads ‘Domain Names’. Now scroll to the bottom and click on the ‘Search’ button. You should now see a listing of recent selling items. The items in red are those which failed to sell and the green items are those which did sell.

2. Check Buyer Feedback

After each EBay transaction both the buyer and seller are invited to rate the performance of the other. This provides a valuable rating tool that allows you be comfortable that the seller will carry out their oblgations after you pay them for a domain. On the far right of each EBay listing is a section that says “Meet the Seller”. To the right of the sellers name is a number in brackets – this indicates the number of unique feedbacks by other buyer or sellers. Below this is the percentage of positive feedbacks. Personally I look for unique feedbacks of at least 10 and percent positive feedback of 100% or at the least in the high 90’s. You can click on the feedback number to see the individual comments of other EBay’ers who have bought or sold with your potential seller.

Of course you can never eliminate the risk that seller will not perform but knowing your seller you can signficantly limit the risk. I have done hundreds of purchases on EBay and my losses from non-perfoming sellers – less than a dollar.

3. Double check the domain extension

If you want a .com domain make sure that check that its what you are buying. A few times I’ve read through the domain description too quickly and ended up buying a .net domain or .info domain when I thought I was buying a .com domain. Ouch!

4. Check for handling charges

A few domain sellers charge a handling charge for transferring the domain to you. Read the EBay listing carefully to see if there is a handling charge. If there is a handling charge deduct this amount from the maximum that you are willing to pay for the domain.

5. Check the Registar

If you have a favourite registrar where you want all your domains to be located make sure that the domain is already at that registrar. Or if you are willing to accept a domain at a different registrar – ensure that registrar offers a free push. Among the registrars offering a free push of a domain to a new account are GoDaddy, Moniker, ENom, Fabulous, Dotster, DynaDot, DomainSite and NameCheap.com. If its a different registrar make a quick check of the web site to ensure that a free push is offered.

6. Check the Expiry Date

Once you buy a name you will be responsible for any renewals. Some sellers place names on EBay which are about to expire. You may still decide to buy but you need to be aware of the upcoming renewal fee. Best place to check both the registrar and the expiry date is a whois checker like Whois.sc or very often the registrar and expiry date are listed in the item description.

7. If it looks to be good to be true…

If you see an extremely valuable domain being offered for pennies on the dollar be cautious – fraud does happen on EBay – you don’t want to be the next victim. A couple of things you can do. One is simply to forget the listing on the theory that it simply is too good to be true. Alternatively you could contact the owner of the domain using the whois information and confirm that the owner is for selling on EBay. Or you can is contact the seller via their EBay listing and ask if they will accept payment via Escrow.com – see suggestion below.

8. For large amounts

If you are not comfortable paying the anticipated price because of the potential for fraud an option is paying through Escrow.com. You will need to contact the seller to confirm that they will accept payment via Escrow.com and to discuss who will pay the escrow charges. Normally the escrow charges are either paid by the buyer or split between the buyer and seller. If the buyer won’t accept escrow – move on to the next domain – there’s lots of opportunities to buy.

9. Use sniping software

Sniping software is used on EBay to automatically place bids just a few seconds before an auction ends. The advantage of sniping software is that you avoid bidding early which would tend to drive up the price of the domain. By using sniping software you get to bid in the final seconds of the auction without having to be at your computer when the auction ends. The sniping software that I use is Auction Defender.com. A free trial version of the program is available. Cost of the program is $14.95 with a charge of $9.95 per year after the first year if you want to continue to receive support and upgrades.

10. Be selective on the auctions you bid on

While there are a few gems there are also a lot of junk domains listed on EBay. Domains that are poor names, the wrong extension or just overpriced. You will be a lot better off buying focusing on quality rather than attempting to every domain on the list.

These suggestions may seem complex but after a few days of reviewing EBay listings you’ll be bidding like a pro.

.Com Price Increase

This week the wholesale cost of a .com domain registration went up from $6.00 to $6.42.  So when you buy a .com domain from a registrar such as GoDaddy – GoDaddy has to pay Versign $6.42 for that registration. 

At this point even though the price increase has gone through GoDaddy continues to offer discounted rates of as low as $6.95.  When you pay $6.95 for a domain – GoDaddy has a margin of $.53.  Out of that margin they pay for a PayPal or credit card processing fee and of course pay all the other costs of running a business like office space, customer service employees, the GoDaddy girls, SuperBowls commercials and of course the web site.

Verisign on the other hand collects $6.42 and has the much simpler task of dealing with a limited number of wholesale customers.  One article pegs their profit margin at 21,400%. 

4 Letter .com’s Registration

Dyyo.com publishes statistics daily about 4 letter .com’s.  For September 4 letter .com’s continued their rapid registration.  The graph from Dyyo.com shows the rapid decline in the number of available 4 letter .com’s:

At this point all 4 letter .com’s beginning with A, B, C, D and E have now been registered. Further every one of the remaining domains contains at least one of the following lower quality letters – Q, X or Z. It now seems likely that all 4 letter .com’s will be gone by the end of the year. Good news for anyone buying 4 letter .com domains.

Hostway? No way!

Most of the domain registrar’s out there do a decent job.  I have accounts with something like 20 different registrar’s and have never had a truly bad experience.  That is until being introduced to Hostway.com.  In late July I purchased ScoreCard.cc on EBay.  Here’s the chronology of my attempts to have have ScoreCard.cc pushed to my account:

- July 29 – received an e-mail from Hostway with a web link to click on in order to make the  push work.  I try it – doesn’t work – I e-mail Tech Support. 
- July 30 – received a response to my Tech Support request asking for the name of the domain.  It was in my e-mail but I provide it again anyway. 
- August 3 – received an e-mail to advise me that the whois information for the domain had been updated.  I e-mailed back to ask how to log in to manage the domain. 
- August 3 – received an e-mail advising that the log-in information had been sent to my e-mail address.  It was never received so I e-mailed back asking for it to be sent again. 
- August 6 – received an e-mail advising me that log-in information had been sent to my e-mail.  It was never received so I e-mailed back asking that it be sent again. 
- August 8 – received an e-mail advising that the log-in information had been sent to me by e-mail.  It was never received so I e-mailed back asking that it be sent again. 
- August 16 – Support e-mails me the log-in information for the person who was pushing me the domain.  I’m honest – I don’t want all his domains – just the one I purchased.  I e-mail Hostway again. 
- August 20 – I am advised that I am e-mailing the wrong department.  I need to be talking with Billing. 
- August 23 – receive an e-mail from Support saying they understand what needs to be done.  They will be working with billing to get this resolved.
- August 27 – receive another e-mail from Tech Support asking me to contact the Billing department directly.
- August 30 – receive an e-mail from Billing advising the push to my existing account is almost complete!  All I have to do is provided a few pieces of information to verify my identity.  I provide the requested information almost immediately.
- September 14 – given a form to fill out and advised that there is a $19.95 “Domain Separation Fee”.  I responded requesting that the fee be waived given Hostway’s repeated promise to make the domain push work.  No response was ever received and I officially gave up on having on the domain pushed to my account. 

 One thing’s for sure – after six weeks of broken promises – I was certainly not going to send Hostway $19.95.