Some time ago I published a post called Financial Engineering: How to Triple Your Market Cap. I was referring to Marchex, a publicly traded company now worth less than $500M and founded by Russ Horowitz, founder of Go2Net, which merged with Infospace back in the day. But the strategy would apply to Marchex, as well as Name Media and any other owner of large domain name portfolio.
Anyway, the gist of that post was that Marchex - who was sitting on countless URLs and using them mainly for search marketing purposes - should bring those URLs to life by actually creating businesses, you know, websites with actual content and a purpose, instead of the kind with no content but only links to paid ads. Don’t get me wrong, the domain navigation business is lucrative, something I covered in Domain Parking Ecosystem here.
Marchex has not done that to date, neither has Name Media. One company that has, of course, is Demand Media. Demand was founded by Richard Rosenblatt, funded by big name investors, including Gordon Crawford (who is a major owner in Yahoo!) as well as Goldman Sachs. If Rosenblatt’s name is familiar, it’s because he was the executive that Intermix’ board brought in after Brad Greenspan was booted from the MySpace parent. It was Rosenblatt who struck the massive $580M deal with News Corp., creating Fox Interactive Media. Previous to that, Rosenblatt started iMall, which sold for an eye-popping $565M to Excite @ Home. You have to give a lot of credit to Rosenblatt who got into this particular space later than Marchex, Name Media et al., but has managed to build a company that in 2 short years has gotten interest from players like Yahoo! to the tune of $1.5B - $2B, according to Tech Crunch, who pegs Demand’s revenues at a healthy $250M and suggests that Rosenblatt is gunning for a $3B exit.
For the record: I am not arguing the merits of Demand Media’s business plan on a stand alone basis. The company is too complex, diverse and fluid for me to do that. I am, however, saying that relative to the Marchex or Name Media strategy, I prefer Demand Media’s. Then again, I am a content/sales guy, though I did work in the search industry back in the day.
I’d be surprised if Yahoo! acquires Demand Media, mainly because it is undergoing turbulent times and Yahoo! does not have that kind of cash on its books (as of its most recent quarter, it had $2.61B) and its stock is fairly volatile. Moreover, I see Demand actually as a buyer more than a seller. I can think of 3-5 more acquisition targets for the company.
With $250M in revenues a paltry two years after launching (though in all fairness, technically Rosenblatt’s crew has bought many businesses that pre-existed Demand Media’s incorporation), then the company’s path seems to be an IPO, though those are as rare as companies with revenues these days (oh, wait, see a connection)? In fact, while Rosenblatt has long been a proponent of social networking, he’s attacked the market in a very smart, methodical and wise way.
In other words: sure, social networking tools and applications are powerful, but devoid of any high quality, premium content, packaged and editorialized in a way that consumers and advertisers can digest, social networking can kill a brand and property, too.
It does go to show, however, that it takes money to make money: Demand Media has raised a dizzying $355M… and while that seems like a breakneck amount, Rosenblatt is on pace to create enough value, fast enough, to make the numbers add up. After all, few companies will be able to step up to the plate and pay $1B - let alone $3B - for the company. So for investors to get back their money, then an IPO seems like the likely route.
But enough from me, here’s an interview Kara Swisher did with Richard:
The following is a perpetual-work-in-progress. Once you start to compile a list of mergers and acquisitions, you realize why it’s nearly impossible to have a complete list. We are quite confident that the following is a very good, comprehensive list of the largest, more notable deals… but it is not - and no list will be - fully complete because there are too many countries around the world and too many industries to report (it is highly possible that the Wall Street Journal or Financial Post, for example, has such a list… but it would be thick and unwieldy).
We have included:
- many industries
- have not adjusted for inflation
- mergers (be it all cash, cash/stock, or all stock)
- acquisitions (we have excluded partial acquisitions)
- private equity deals.
It is certainly not complete, send me any ones you think I am missing or industries you want us to add next to ash@mojosupreme.com or leave in the comments.
Trivia:
- In 1981, when DuPont acquired Conoco for $7.8B, it was the biggest deal of all time. But adjusted for inflation, that remains a $20B deal by 2008 standards.
- KKR’s private equity deal for KKR remains the biggest buyout when adjusted for inflation, but in actual dollars it has been long surpassed.
Related on HipMojo.com:
The following applies to any company in the search space that works in direct navigation, parked URL and what.
I am using Marchex because they’re publicly traded and the data is available… but technically it would also work for NameMedia, too. Bear in mind, these companies would scoff at my suggestion because they are cash generating machines, but:
Today comScore came out and reinforced the fact that Google is creeping closer and closer to owning the search market. Over time, I also think that the parked URL and direct navigation industry faces some major challenges (I won’t name them here), so if you are running one of those companies, what do you do?
Do you continue running a direct navigation, domain parking company or do you leverage your traffic and move into a new direction?
I am a content guy, so I am biased, but I suggest that these companies should add content ASAP. This would boost their SEO ranking (because they’d have content), but by adding content, it would also open them up to display/banner and video advertising opportunities.
But what about a more crazy idea: what if it simply yanked its contextual text links and added video pre-roll advertising before video content (gee, I wonder where they can get the video content?)
I’d be the first to admit that by adding content, any content, overnight the revenue from text links would fall a bit. Over time, these sites would come to life and they’d get more traffic, more revenue, and more importantly, better quality revenue.
But you know what, if any of these companies really was progressive and could see what was ahead in 1, 3, 5 years, they’d shift their business to actually licensing content and selling ads, that would be the new kind of traffic arbitrage.
In fact, if a site like Marchex would swap out its text links (how it makes revenue) and ran video ads before video content, overnight it could create a company three times more valuable.
All I am doing here is extrapolating online video viewership stats and behavior to Marchex’s internal stat of 31M unique users per month.
Today Marchex closed at $385M in market cap, but a little bit of corporate restructuring and financial engineering would yield a company three times as valuable.
In this case, I used 100% pre-roll frequency, which is madness on any other site, but if its sites remain of the direct navigation nature (aka, users don’t return more than once), then this works. Also, the idea of the $20 CPM is simple: with high quality, generic domain names, it’s easy to argue that someone typing in for sushi.com for example is a very targeted user, hence the decent CPM rate.
You can send my consulting fee by mail, cash works fine.
The search industry has been putting too much of a premium on paid results at the detriment of organic results.
Well, not so fast. The quintet of mass search - Google, Yahoo!, MSN, Ask.com and AOL - have focused on both organic and paid, but the laggards have not, and the market caps - and market shares - of these is a reflection. This quintet also battles for mass search supremacy, leaving a great opening for niche players.
You would think that players #6 and down would compete in this space, but these smaller players have adopted a me-too strategy of trying to be masters of monetization, and effectively hurt their organic results.
As developer of the domain-specific vertical search engine MetaMojo.com (along with a video meta search engine), that makes me very happy as it creates a demand for any way that these smaller search players can improve their organic results, assuming they actually have something in place to begin with.
MARKET SHARES
The leading five companies account for 99% of the cumulative market share, and the laggards get less than 1%. Should they even bother? Well, yes, because search remains a lucrative business.
But the problem with the laggards is that they put an emphasis on paid results at the detriment of organic results. Some, in fact, do not even have an organic search strategy.
MARKET CAPS
Google is the 600 pound gorilla, naturally, with a market cap of $150B, revenues of $10B with profits of $3.2B in 2006.
Then enter Yahoo! who let Google become what it is today by using it on its portal. Yahoo! is worth as a total business $38B. It’s the #2 in search.
Microsoft commands a market cap of $300B nearly, but I’d estimate that MSN.com (with the portal and search business) is worth $29B. See that analysis here, in “Should MSFT Spin Off MSN.com/Live into Yahoo!?”.
Ask.com is the #4 player, and sold to IAC a few years ago for $1.8B. Today it’s search business within IAC is worth more. I’ll look at a valuation of how much soon.
AOL.com is #5, and is a part of Time Warner, the largest media company in the world with a market cap north of $70B.
Let’s examine the smaller players now (not in order of value):
- Answers.com is one of my favorite players in the space, it is not a cheap company by any stretch of the imagination, and it is very vulnerable to Google one day waking up and removing their link off their results page. But once you grapple with that risk factor, you realize Answers.com is a unique company that is smart enough not to even consider itself a competitor in search. I own shares in the company, who have gone up and down since its IPO a couple of years after dropping the software subcription model for a free, ad-supported strategy. The company boasts a market cap of $122M and while it is rich in any traditional method, for what you get, it’s an intriguing place to plunk down your money.
- MIVA is one company that does not have an organic strategy at all. It has a number of paid products and last year launched an interesting contextual product, but the problem is that in an era where Google, Yahoo! and MSN can outbid you for distribution and have FAR more advertisers, I cannot see MIVA getting any traction.
Its market cap? $181M.
I own shares in MIVA as well, but mainly / solely because I view it as a cheap M&A target with a solid European presence, which I like. But ask me what I think of its stand-alone prospects, and the honest answer is: not much. I don’t own many shares so it’s not a large holding.
- Mamma.com (disclaimer: I worked for Mamma in 2000) is a drama story that has had enough storylines to merit a movie made about it. I have bought, sold, bought and sold stocks in this company over the years. I could have made a lot more, but the volatility was too much to handle so I always got out upon making a decent return. I don’t own any shares and frankly view this one more as a desktop search (after it bought Copernic) and as it stands, I view desktop search as very competitive. Mamma.com is worth some $60M on Nasdaq. Can it be an acquisition? Sure, who is not. But I see better fits than Mamma.com, who’s search technology is a meta search and a video meta search that is powered by Pixsy.
- InfoSpace is also a company I own stock in (see a trend).
It’s a drama in itself. Just yesterday, the company closed with a market cap of $640M and an enterprise value of $200M. Today the stock is up 20% (more on this below) and the company is right now worth $817M with an enterprise value around $266M.
In fact, INSP’s slike this morning is what drove me to write this post.
The stock spike was odd because yesterday was payout date for the special, one-time dividend of $6.30. INSP had over $400M of cash up to recently, and at the behest of institutional shareholder Sandell Asset Management, it recently paid out $300M in dividends.
I bought INSP way back when people got excited about search and Google was not an option (not yet public). I think Infospace is a company that will one day offer shareholders a nice payout in a sale. It’s bound to happen, but please note, I am biased in saying this since I own shares.
Today I got to work and saw INSP up $3.40. Why, I asked? According to some rumors:
Spanish newspaper reported that Spanish cell phone and Internet content company LaNetro Zed SA is working out a deal to buy the company for 800 million euros, or about $1.08 billion.
More rumors of a sale, problem is:
So InfoSpace has two businesses — online and mobile — and both of them have issues. The online business, made up of the metasearch and private-label services, is the company’s cash cow, generating more than 60% of its gross profit last year. One of the biggest difficulties facing that business is that the search service ain’t that great.
“The problem with that product is that it offers an inferior search experience,” says Mark May, an analyst with Needham. “Rather than always delivering you the most relevant results, it delivers you the most relevant advertisements, which aren’t always the same thing. From a consumer perspective, they don’t compare favorably to the bigger names like Google.”
The mobile business’s problems are more extreme. In late September InfoSpace disclosed that Cingular, its largest ringtone customer, wouldn’t renew its contract. (Carriers have moved to sign deals directly with major record labels, cutting out InfoSpace as the middleman.) Three weeks later the company decided to exit the mobile content business, which contributed the bulk of the division’s revenue.
InfoSpace, of course, got into search when it merged with Go2Net back in the day. Go2Net ran Metacrawler and Dogpile, and in many ways, InfoSpace never did much with the products. If I am wrong, please advise.
InfoSpace has essentially dropped the ball in organic search (or never dipped their toes), and the market reflects badly on them.
- Marchex is another player fully involved in paid search, I like that they focus on verticals. For full disclosure: I am unhappy (as a client) with Marchex’s unit at Goclick. Here’s the entire story.
That issue notwithstanding, I think Marchex is well positioned in the entire parked domain name business, which I do not particularly like, but many in the mainstream media and venture capital community do. Marchex weighs in at $650M in market cap. Marchex was actually founded by Go2Net founder Russ Horowitz.
- Looksmart is a company I made a nice return on as well and got out, at the right time, since the stock has stalled since. Looksmart totally repositioned a couple of years ago and dove into the vertical search business. I think it has a strong monetization rate, but Looksmart, too, is a bit all over the place. However, of all of these companies, it might be the best positioned in terms of organic results. For a while, it did not have an algorithm in place and relied on its directory, that changed with the purchase of WiseNut.
A little side story: before Powerset and others became “Google’s latest threat,” ’twas Wisenut and Teoma. Teoma was bought by Ask Jeeves, who itself got bought out by InterActive Corp. for a whopping $1.8B.
Looksmart is worth some $77M but it boasts a lot of cash on its books, about $37M, so its enterprise value is in fact a modest $40M.
Of course, this does not mean you should dive in and buy the stock, it is extremely hard to compete in this space, even though it is indeed very lucrative when you’re a market leader.
Connecting the dots…
It is interesting to note than even the #5 player Ask Jeeves (at the time, it has since moved up to #4) realized that remaining a stand alone search company was simply too hard, so it sold to Barry Diller’s IAC.
This makes me wonder why INSP, MAMA, LOOK, MIVA, ANSW even bother… but that is just the point: search compaies remains a very likely M&A target. But as the article in Smart Money suggests, some of these companies drop the ball in search result quality, so it might not be foolish for them to try to improve that component of their business before selling out.
Disclosure: at the time of writing I own shares in INSP, MIVA, ANSW, YHOO and would like to resolve my little issue with Marchex ASAP!
[Editor’s note: the following article talks about the perils of search engine marketing and the click fraud I discovered after using GoClick. GoClick is a unit of Marchex. For that scroll down halfway until Search Engine Marketing: Buyer Beware. For the background and state of the Search Engine Marketing industry, sit back and enjoy from the top.]
Last week, Business 2.0 published an article on domain-king Kevin Ham:
The man at the top of this little-known hierarchy is Kevin Ham — one of a handful of major-league “domainers” in the world and arguably the shrewdest and most ambitious of the lot. Even in a field filled with unusual career paths, Ham’s stands out.
Trained as a family doctor, he put off medicine after discovering the riches of the Web. Since 2000 he has quietly cobbled together a portfolio of some 300,000 domains that, combined with several other ventures, generate an estimated $70 million a year in revenue. (Like all his financial details, Ham would neither confirm nor deny this figure.)
This article was in fact a follow-up to an earlier B2.0 gem: Master of their Domain. Today the NYT talks about Highland Capital-backed NameMedia. Despite the mainstream media’s awe, most in the know smell a rat when they see one.
That first B2.0 article prompted me to write “the domain name ecosystem” post which came up with a valuation model for parked domain names. In short, my formula was:
Value of domain name = Income or Objective Value + Capital Gain or Subjective Value
1. Objective or Income Value = # of times a keyword is queried in a given month x Revenue Per Click (or CPC for the advertiser) x Click-Through Rate (CTR) x Type in traffic % x Revenue Share Arrangement with PPC text ads provider
2. Simply what you can resell a domain name for, less what you paid for it.
The legend goes that the first B2.0 article prompted former Intermix Chairman Richard Rosenblatt to raise $200M for Demand Media, a company that seeks to turn parked domain names into sites with actual content. Rosenblatt has a fantastic track record, we wish him well, but the key thing there is “actual content,” for most parked domain names have anything but.
How do these sites work? According to an article from the New York Post:
The easy money has led to a rise in “made-for-AdSense” Web pages that critics say clutter up the Internet and divert online searches. These content-free sites, which often are nothing more than links to other sites and a bunch of Google ads, exist solely to exploit AdSense.
“The economy has built up to game the Google system,” said Darren Chervitz, the director of research for Jacob Asset Management.
Web site publishers do it by pocketing the difference between what they pay Google to drive traffic to their site and the amount they get for running Google ads.
For instance, a publisher can bid on a cheap search term, say, “purple raincoat” so that its site purporting to be about raingear is displayed each time someone searches for the term on Google.
The publisher may pay a nickel to Google each time someone clicks on the link to their Web site, which may be nothing more than a picture of a purple raincoat.
The publisher makes money if, on average, they collect a dime each time a user then clicks on one of the Google-supplied AdSense ads.
Why Google is a Leader in Search
This past week, Google announced that it was punishing such domains, because they were not only an eye-soar on the Web but they hurt advertisers: “If advertisers get a bad return on their investment, they will stop spending money,” said Jeremy Schoemaker, an AdSense expert who runs the popular ShoeMoney.com blog.
This was noble on Google’s behalf, because with a market cap of $150B and 2006 revenues of $10B, Google has a lot of incentive to let these things slide. But, despite a lot of growing criticism over Google’s grip on searches - up to 55% in April 2007 - the company did the right thing, because it is highly short-sighted for any search company to accept these techniques, because if an advertiser gets burned, it hurts everyone in the Web economy.
Indeed, the article continued:
Although Google still makes money off of these sites, they don’t like them because they hurt the quality of search results and reduce the “click through” rate for advertisers.
In fact, I’m not sure what Google will actually do with these sites. If Google is sticking to its “Do No Evil” mantra, it should ban them. Anyone in the online ad business that argues differently is simply not imaginative enough to think of a more honest and less unethical way to make money.
What About The Advertisers, Those Paying For The Clicks?
A couple of months ago, popular Silicon Valley blog Valleywag reported on a number of companies who resorted to dubious and highly aggressive user acquisition techniques to boost viewership stats. Turned out that some online publishers were not all that different from their offline brethren in questionably boosting readership.
First, “The Sleazy:”
Valleywag actually named a few, Orbitz being one. Orbitz’ technique, which Valleywag dubbed “sleazy” consisted of forcing new browsers via popups to boost readership, even though most people getting hit with these ads a) had little interest in Orbitz and b) closed the ads immediately.
The problem, however, was that the new browser would serve ad impressions for Orbitz’ advertisers, who were being charged [probably] by CPM (for a complete overview of online ad lingo, click here; for an overview of market sizes etc., click here).
In this example, Orbitz was the advertiser, and not the ad network. Of course, whether or not Orbitz was aware is up to debate. Sometimes the publishers are not. Sometimes they are.
Orbitz was not alone, and this was not an isolated case: Valleywag had earlier discussed such a case involving Orbitz, as well as Bolt in this post, which was in fact based on an article in the NYT (the NYT “article” is behind a pay-wall, rendering it useless). Valleywag continues:
Ben Edelman, a researcher into spyware at Harvard Business School, says Bolt.com, which claims 15m unique visitors each month, was referred traffic by Paypopup, a marketing agency known for tricking internet users into visiting sites. Away.com, part of the Orbitz online travel group, received traffic via Web Nexus, another agency, this one registered in Bosnia, known for running pop-up advertising without a user’s consent.
Bolt and Orbitz are by no means alone. Edelman earlier identified other culprits: Heavy.com, the video humor site, Conde Nast’s travel site and one of the leading online business titles, Forbes, which is owned in part by Roger McNamee’s Elevation Partners. It’s typical for these companies to say that they used marketing agencies to attract new users, but didn’t know they were in turn connected with less reputable internet marketers, such software distributors which sneak spyware onto users’ computers, to spawn unwanted ads. That’s simply not credible: if the publishers claim ignorance, it was simply because they chose not to discover how the traffic was obtained.
It is very important to stress that last point, which I underlined.
Then came the questionable…
Confessions of an Honest Publisher
A few months ago, an advertiser placed a large advertising order on our site. I explained to them that I would not be able to fill the impressions they wanted to buy in the insertion order. They appreciated my candor and said that “anything I could do to maximize their buy would be appreciated.”
I asked and got their blessing to drive traffic to our network of sites, ranging from:
- the Web TV content producing property WatchMojo.com,
- the Top 10 Reference site TenMojo.com,
- WhyMojo.com, a website with tips for college students and Gen Yers,
- AxeMojo.com, a rock and roll site, and
- the online bio of Alexander the Great, RawMojo.com.
Not all clicks are created equally
Admittedly, not all clicks are created equally. When someone searches for “Madrid flights,” a hotel chain or travel site might bid $1 and much more because travel is very monetizable. Alternatively, when someone searches for “history of Madrid,” the search becomes less valuable.
In other words, e-commerce skewing keywords have historically yielded higher CPC (cost-per-click).
Search Engine Optimization, Word of Mouth and Branding
Publishers have numerous sources of traffic. With us, it’s no different:
1 - Organic Search: A lot of our traffic comes from organic Google, Yahoo!, MSN, AOL and Ask’s results.
2 - Referrals: We have the thousands of websites, blogs and personal pages that link to one of our 20,000 pages of content.
3 - Direct, Type-In: Then there’s the offline media mentions that drive traffic, and finally, our ever-growing amount of type-in, direct traffic of people who type in HipMojo.com and get redirected to this page or WatchMojo.com for our flagship property’s main page.
Of course, astute publishers - and marketers in general - also turn to 4 - paid search.
Since that large advertising buy forced me to look for new sources of traffic, I decided to try a handful of search engines for paid clicks. These were: Mamma, AdOn, GoClick or Google.
Search Engine Marketing: Buyer Beware
Going into my foray in search engine marketing, I thought that we could drive a lot of quality clicks because with 20,000 pages of content on such a wide array of topics, there was plenty for the new eyeballs to feast on, especially since our content strategy of creation, aggregation and indexing spans every single category (automotive, health, business, entertainment, travel) across all formats (text, video, blogs, contests, top 10, etc.)
Yet quickly, things proved differently. I should probably not be admitting this, and I think that is what a lot of search engine companies count on. Upon finding out what was going in, we stopped working with all search engines apart from Google.
Mamma.com
Disclaimer: I worked for Mamma.com in 2000 before entering the online publishing space in September 2000.
Mamma.com was willing to give me a really low cost per click for both US and international traffic, but within days it became clear that the ratio between pageviews and unique users they sent me was way too low.
Mind you, I was buying network - and not keyword-based - traffic. Figuratively speaking, I understood that I was throwing traffic against the wall in an attempt to see what stuck. Apparently, not much. That was probably a waste of money. But, at least, I didn’t walk away thinking it was fraudulent.
I cannot say that Mamma.com acted immorally for the simple reason that they told me “you are buying network traffic.” But, given that the pageview/click count was so low, it did not make sense to buy more traffic. I did a couple of trials and ultimately winded down my campaigns with them.
AdOn Network (formerly MyGeek)
AdOn cold-called me and asked me if I wanted to do a test. I had not heard of them and asked for some information.
The follow-up email demonstrates what is so wrong with the SEM industry, and the publishers who use it and ultimately sell out their own advertisers.
Their pitch email read:
Here is a list of companies that work with AdOn network who have been buying this traffic for the past 5+ months:
- Heavy.com,
- Buzznet.com,
- Jokaroo.com,
- RipeTV,
- Mania!TV,
- Buy.com,
- AtomFilms.com,
- Entrepreneur.com.This traffic has met the needs of these advertisers to such an extent that collectively they spend $10,000-$15,000/day just on run-of-network CPC traffic.
The simple truth is that this email should be accompanied by: “if everyone jumps off the bridge, would you too?”
Note this was before I had read the post on Valleywag, who has written quite a bit on “puffing up audiences for advertisers,” and like the gullible ham that I sometimes am, I went ahead and did a $50 test, over one day. I kept it low because I did a quick search for “AdOn Scam” and realized this might indeed be a scam. But, search for anything online, and it will pop up on the Web.
So, I proceeded with the campaign. Shocking result: AdOn generated the worst result thus far. Its traffic was yielding 1.01 pageviews per click… In other words, the clicks would leave almost as fast as they would come in.
Because I could not really see where AdOn was getting its traffic, I was willing to blame myself and not AdOn. The argument that “hey, it’s low-cost traffic” was used by AdOn as an explanation of its horrible result.
Fair enough. After all, if you order a hamburger and not a steak, you should not expect a Filet Mignon if you get a quarter-pounder, or so I accepted the PR-spin.
GoClick
GoClick was acquired by Marchex some time ago. The truth is, legend has it that GoClick’s founder was quite the customer service guy, but now being a part of a publicly traded search company with a market cap of $500M, Marchex has to make GoClick churn out more of everything: more clicks, more revenue, more profits. And apparently, more mindless PR drivel.
That translates to more risk.
GoClick was the one company I had spent the most with, partially because they allowed me to come up with numerous keyword-based campaigns at low costs. As such, this was largely a seemingly low-risk turnkey solution.
Or so I thought. When I started this campaign, things seemed fine. Considering the 20 or so things I do at the company, I was not monitoring this daily, or weekly. Rather, once a month I’d check in. And when I did, I’d get a top-level view of things…
That all changed in April 2007 when I unearthed GoClick’s major click fraud issue.
There’s no need in hiding that. I emailed GoClick and Marchex documented proof of it which led to a conversation with their VP of Advertiser Services Scott Greenberg, but ultimately their reaction was arrogant, followed by one month of inaction, which led me to write this post.
The Jig is Up
By late April, 2007, Google had proven too rich for my blood, my low CPC tests with Mamma and AdOn were concluded and as such, the only source of paid clicks was GoClick.
Unlike Mamma and AdOn - who would funnel all of their traffic through one URL, such as partners.mamma.com in Mamma’s case - GoClick was more transparent.
Looking at Google Analytics, I saw that initially their traffic came from sources such as searchportal.information.com and landing.domainsponsor.com, but that progressively it included sites like myspace-junk.info. By the time you read this, myspace-junk.info is long gone into the annals of web history, which is fitting because these sites stink and the intermediaries that profit from them like GoClick - or their parent Marchex - are full of shit.
Individually sites like these did not send massive amounts of traffic, but cumulatively they did. According to my analysis using Google Analytics using a sample period, up to 40% of GoClick’s traffic came from such sites.
Not All Parked Domain Name Sites are Created Equally
At first glance, you sort of think such a site is nothing more than a domain parked URL that people accidentally land on, but come on, it’s one thing to go to atorney.com (instead of attorney.com), but theadopt.info? Who the fukc.com types that?
We’ve all heard about the billions dollar industry built on people’s inability to spell, yippie!
It goes like this:
But, in my analysis/investigation. Something was off. Who mispells theadopt.info. dot info?
From there, I cross-referenced about 20 or so of these websites and did a Whois to see exactly who the page belonged to and more importantly, how long it was up and running.
What did that reveal? A perfect, typical example:
Marchex’s Eastern Europe Unit?
Turns out that most, if not all, of these websites were set up very recently in Eastern Europe. Some had disappeared, but others, like theadopt.info are alive and well.
I don’t blame our boy Vasily Petrov for doing this, but I certainly blame, and I’m sure the courts would do, companies like Marchex for turning a blind eye. When you consider that it’s been a month, you have to ask yourself: does Marchex encourage this?
The big picture
I also think that online advertising has enough momentum and a bright future not to have to resort to this. Yes, I am talking about the companies that Valleywag first talked about, like Orbitz, Bolt, and mainly a site like Heavy.com, who seems to hellbent on positioning itself as an uber cool and advertiser friendly place. If indeed Valleywag is correct in its assertion, then this is anything but cool.
Who’s to Blame?
Then again, when a VC like Polaris comes by and plunks $20M in a company like Heavy.com, or when a company like Bolt sees new upstarts zoom past it, or when Orbitz can’t get clients as quickly as Expedia or Travelocity, maybe it’s not their fault. Maybe it is the system.
Bull-f*****-shit. I don’t exactly try to pass for a holier-than-thou bloke but the instant I saw what was up I
a) cut off the poor quality sources of traffic
b) emailed the ad network in question
c) found alternative, ethical ways to drive traffic.
I encourage everyone involved to do the same. Such tactics make us all look bad, and give offline marketers and publishers a great tool against us.
The Situation As it Stands
A month ago I emailed GoClick with the facts. I got an email back from Scott Greenberg, VP of Advertiser Services but since then it’s been PR and spin. Clearly, they don’t know who they’re dealing with. I wanted a fair and reasonable solution, and their promise to look into the matter. As you can see, that has not been the case.
Marchex’ main argument was “hey, it’s low cost traffic.”
First off, that was a month ago.
Second, that answer is braindead PR drivel.
Like I countered: “yes, if I order a hamburger instead of a steak, I won’t expect filet mignon, but don’t feed me dogmeat and try to pass it as something else. It should at least be beef, no?”
I guess that’s my beef: this is bullshit because trying to pass off fraudulent clicks for the real thing is as low as it gets. I am not surprised to see no-name companies try to pull this, but Marchex is publicly traded and founded by former Go2Net CEO Russ Horowitz.
Oh, I’ve also followed up - via phone and email - about a dozen times. Still, nothing. Not even the run around, we’re talking nada, zilch, nothing.
So, what do you think? Am I alone? Have you experienced anything similar? Let me know. Surely I can’t be alone… and maybe it will take a few more of these cases to get some bad apples to change their ways.
Oh, a PR Tip…
One more thing, nowadays, your clients probably have a way to channel their discontent. So next time someone takes the time to contact you and report a problem, don’t try to insult their intelligence. Instead of losing a lot of clients, you’ll stand a chance of impressing them. In this case, Marchex failed across the board.
Disclaimer: at the time of writing, the author holds no position in any of the companies mentioned above.
UPDATE #1: Ironic how at 4:40pm EST, theadopt.info is not up, and now only says Error (even though it was up last night). Nice to see it took this post to get the person who set up theadopt.info to at least yank the site.
Now it would be nice to get some sort of explanation from Marchex and GoClick.
UPDATE #2: Too bad at least 20 of the other such fake sites are still up, some thing tells me I can dig down to the 100 top of these referrers and they’ll still be up as I type. Of course, these sites were set up by random folks taking advantage of “the system,” but then why do companies like GoClick still run ads on them?
Make no mistake about it: the company has known about this, at the very highest level, for over a month, and nothing. ABSOLUTELY NOTHING. No reply to emails, no returned calls.
Will be very interesting to see what their official story will be. Updates to come…
PLAY
