Some Consequences of Pay-Per-Click’s Growing Pains - Pay-Per-Click Inspires Smaller “Ventures”
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If anyone foresaw the possibility of click fraud when pay-per-click advertising first came out, he or she is no doubt enjoying a well-justified “I told you so” moment now. After all, it’s not often that a major company’s chief financial officer stands up and admits that a problem is so serious it could potentially threaten the company’s business model, as Google CFO George Reyes did in December 2004. But there are other consequences of the pay-per-click advertising model that likely few people foresaw. One of these is the domain name gold rush.
To be more accurate, the “gold rush” can be blamed on a concatenation of circumstances. The main factor, of course, is how easy it is to publish pay-per-click advertising links from Google and Yahoo!. All you need to do is put up a site, join the Google AdSense program (which only costs time, not money) and/or the corresponding Yahoo! program, and you’re literally in business.
The second factor is how inexpensive it is to purchase a domain name. VeriSign, which runs the .com and .net domain names, reported that one could be had for as little as $6 to $7 per year. At that price, a website hosting pay-per-click ads doesn’t need to get many people clicking through its ads in order to turn a profit. The third factor is the five-day “Add Grace Period,” during which new registrations can be deleted for a full refund.
This leads to a situation in which close to a quarter of a million domain names are registered every week for only a few days, in order to test the traffic potential of the names before they are discarded. Since the domain names only need to deliver a small amount of money per year to return their owner’s investment, a large number of names that do even slightly better than that can return a respectable income.
The domain name gold rush caused VeriSign to change the way it reports the number of active registrations it receives for its domain name business. VeriSign CEO Stratton Sclavos said it would reduce the size of reported registrations by about two percent. “At the end of Q4 we probably saw about a 40,000 to 50,000 name difference between the end of quarter number and what happened five days later, at the end of Q1 there was about a 150,000 name difference, and at the end of Q2 it was about a 700,000 name difference,” he said by way of explanation. “We know that at the end of any given week, five days later a substantial number of names that just got registered will get deleted out.”
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