DomainTools Blog

One of the things that has always bugged me about Marchex is that they try and hide what domains they own. It is not hard to figure out Marchex owns something. They have subsidiary called MDNH, Inc. If you notice the copyright in the bottom of one of their parking pages cites this company as the copyright owner of the parking page. MDNH is really a subsidiary of Marchex. Marchex has purchased a lot of companies and all of them seem to show the real whois. For the SEO company they own, TrafficLeader.com they show their real address: “Marchex Domain Admin, 413 Pine, Suite 500, Seattle, WA, 98101, US. Phone: +1.2063313300″. However on all the parking domains they own they hide who they are. For example they own MotherBoard.com, but they list their registrar’s proxy service: “Moniker Privacy Services, 20 SW 27 Ave, Suite 201,Pompano Beach, FL, 33069, US”. Marchex owns a lot of domains, why would a public company hide the fact they own over 100,000 domains. They mention it all the time in Press Releases however the whois is always hidden on those domains. Who or what do they think they are hiding?

Do they think they will rank better in Google.com’s search engine if they are not listed on the whois record? The answer is no but I think they internally believe yes. It is creepy that a public company wants to play shell games. It almost seems certain they must have skeletons in their domain name closet when they try to conceal the identity of almost every parking domain they own.

Marchex, I suggest if you really want to hide domain names, don’t resolve to IP addresses that have been allocated to you by ARIN. It is a dead give away.

Second, we know you always use the same set of name servers.

Name Server: A.NS.ULTSEARCH.COM
Name Server: B.NS.ULTSEARCH.COM

Third, there is whois history on every valuable domain you own. We know you own it. Stop trying to hide. It is like hiding an elephant behind a toothpick. Why bother? It just makes your company look shady.

Forth, the attempt to hide your identity by using multiple registrars and different proxy services at each registrar is just plain obvious. Is that suppose to be clever?

When people question if Marchex is engaged in Search Engine Arbitrage. You can’t put it past them, they seem like they are on the shady side of things. Does Marchex use arbitrage to pump up quarterly results and show more revenue? Marchex doesn’t disclose a lot of things but one can only wonder.

In every market there are middle men, when you buy a car you are not buying it from the car maker, you are buying it from a dealer. The men in the middle buy low and sell high. This has always been the rule for men in the middle. Huge fortunes can be made being in the middle. Even Wallmart follows this formula, they buy from China and sell in America. The same formula for success can be done online as well. Buy Cheap Ads, Show Expensive Ads. For anyone wanting to be your own boss, I would start small. Start with online arbitrage of real assets then move to traffic of Digital Visitors. You will learn a lot in the process of goods. Going to college is not necessary to be rich. You just need to be smart.

Here is a blueprint to a million dollars in 9 easy steps:

1. Go to Craigslist.

Start writing down the things that are for sale along with their prices. However don’t write down anything over 50 pounds.

2. Go to Ebay.

Start looking up prices of things you found on Craigslist. Look at the completed items list. This is an advanced search option, so find that option. Note the difference in prices on all the items you have written down. Now order your list based on the price difference. It helps if you do this in Excel.

3. Contact the Craigslist seller and Buy, Buy, Buy.

Now you have a hit list of things to buy. Start buying the things on the top of the price differential list.

4. List the item for sale on Ebay.

After having bought the items. Go list it for sale on eBay. The market is more efficient at eBay because it is auction based. People on Craigslist are just listing things with a “buy now” price. Craigslist is also very local, so there are less people looking at those items.

5. Repeat Step 1-4 until you have $10,000.

Don’t move on to the next step until you understand how arbitrage works and you have some seed money. You are leveraging the inefficiencies of one market verse the efficiencies of another. This is the graduation exam, if you can make a living off of craigslist you are ready for Keyword Arbitrage.

6. Take the Seed Money and go High Tech.

Take the seed money and buy a hosting account from someone like VPS Link or Spry.com. You then want to set up a website about Credit Repair or Mortgage Rates. It will need to be a 50 page website with lots of good facts and well written articles. It is important that you write these articles or that you take that seed money and hire someone to write the articles.

7. Install Google Ads.

After the website is complete apply for a Google Adsense account. Don’t skip to this step before completing Step 6. If you are rejected go back to Step 6 and work on it. Your site needs to be polished. Don’t be afraid to spend that money from Step 5. Once you have your account. Place ads on your website in a manner that will convert visitors.

8. Research terms to Buy.

While creating all those articles write down terms that are less common but apply to your website. Start buying keywords that are cheap at Yahoo and MSN. Track conversions very closely. Make sure you are running Google Analytics on the site. Measure how many people come in from each keyword and then measure how many leave via a Google Ad.

9. Scale and Grow.

Step 8 is very hard so be sure to get that step nailed down. Once you see a profit start to scale the operation. Start adding more sites and more content. Keep buying low and converting those leads into visitors to the Google Ads.

Summary:
Building websites with good content and buying cheap leads for those website is a career path that was not possible 10 years ago. For more information on Search Engine Arbitrage read Paul’s Article that came out this week. He has some more details on the search engine side of buying keywords.

Search Engine Arbitrage is defined as buying ads from a search engine and then selling ads at a higher price. For example the arbitrager buys the term “rare dirty coin” at Google and pays $0.05 for the ad because no one else is advertising on that term. Once the user clicks on the arbitrager’s ad he is taken to a page about “gold coins”. Let’s say the term “gold coins” makes $0.70 per click. The Arbitrager would need to convert 1 in 13 people to make a profit or 1 in 14 people to break even. We can think about Arbitrage as a keyword funnel, collect a lot of small terms and lead them into a big term. I think search engine arbitrage is another brilliant way of Mining the Longtail. There are drawbacks to arbitrage though, the market can only support so many of them. Geosign just announced they raised $160 Million from American Capital. With big announcements like this there is a lot of attention being focused on the keyword arbitrage market.

Let’s say there are 50 companies engage in large scale keyword arbitrage right now, they all make a return on their investment of 400%. If the market had 2,000 arbitrage companies I know the return would be much lower for all. I see algorithms getting smarter and machine evaluation processes getting faster, in short, to survive long term companies will need to have smarter machines then the next guy. The beauty of the longtail is that it can support a lot of companies. So it may take 30,000 arbitragers to drive average profit to 5%. The Fat Front of the Longtail will be eaten up very quickly and arbitrages that try to survive there will die, only 10 companies can show up for a term. So if 30 companies rule this industry we can see that there will be a collapse at some point and rest of the companies will fold or be bought out. However, reselling a poorly preforming arbitrage company will be harder then selling sand to an Egyptian.

Frank Schilling has a good perspective on how search engine arbitrage compares to domain arbitrage. He point out that only one company controls a domain, meanwhile anyone can bid on a search engine term. Traffic on a domain will never go away and a competitor will never drive costs up for owning the domain. For the king of domains it is easy, he can focus on domains and weather the arbitrage storm. Even if he enters the arbitrage business he has a safety net of 300,000+ generic domains with tons of type-in traffic. In Franks own words, “Homer Simpson himself could not kill Name Administration“.

My take on all this is that search engine arbitrage is here to stay but the margins will get thinner in the future. We can expect the leaders of today’s pure arbitrage business to get tossed out. Historically, the first to market in a highly competitive environment will lose their lunches to the next smartest company. Mosaic and Netscape are prime examples but I am sure there are more. Margins will compress rather quickly and the smart guys will be left. For the companies that want a re-do, they will need to have a back up plan. Marchex is a good example of a company with backup plan. They have a huge domain portfolio that has natural traffic.

There is a clear evolution for domain owners to play in this space: (Domainer > Registrar > Media Company) Once a domainer has hit the Media Company phase they can start playing in arbitrage. There are more direct routes to becoming an arbitrage company, start as an SEM company. But SEM companies are more pure play and don’t have backup plans, so I predict will be the ones that get squeezed out as margins compress.