This one isn’t so much a contribution as it was me begging to post it.
Its a great article from Phil at HelpWebmasters.com on a technique called Domain Kiting. The original can be found here. He promised he’ll post more great articles like it so be sure to check out his site in the future.
I’m going to let some secrets out of the bag about Domain Kiting
So for those that don’t know what this is, listen up. You can register a domain name and cancel it within 5 days of purchase. It USED to be that the registrars would let you do this for free. Now most registars charge between $0.25 and $2 per canceled domain. See I would register hundreds of domains a week and cancel about 99% of them, just keeping the good ones that got traffic in the 5 day period. I would reg the domains and then change the DNS over to a parking page (like sedo.com) then I would be able to easily see how much direct navigation (type in traffic) I got.
Here is the formula for figuring out which domains to keep:
1. (Amount of type-ins in 5 days) * (365/5) = amount of traffic you could reasonably expect in a year. Now a good parking page will get ~20% click through rate, so take your clicks per year * 20% = number of clicks that you get paid on.
note: keep in mind seasonality…so if you register xmas domains expect to see higher numbers in December.
2. Find out the average CPC via the overture tool by taking the top 5 bids and averaging them so this formula is: bid1 + bid2 + bid3 + bid4 +bid5 / 5
3. Now take that average bid per click price and divide that by 2. This is the rough amount per click that you can expect from a PPC program on a parking site or Google Adsense, Yahoo Publisher Network, etc…
4. Next take the price you paid to reg the domain / average PPC from step 2 =# of clicks you’ll need in a year to break even on your domain.
5. So, if the # from step 1 is > # from step 4 then you are in the black.
Let me do some real numbers to highlight this again.
1. So I got 4 clicks in 5 days during my domain testing period. Take that number times 73 (73 is from 365/5) that that equals 292 clicks per year. Take clicks per year 292 * 20% and you get = ~58
2. Now by doing keyword research we find that advertisers are paying $0.34 a click.
3. Divide $0.34 by 2 to get your estimated earnings per click at $0.17
4. Let’s say I register a domain name for $7.00 per year divide that by $0.17 and you get ~41. So you will need 41 clicks a year to break even on your domain.
5. So you estimate that you can get roughly 58 clicks and you break even at 41 clicks. So u in da black.
So imagine what happens when you find one that gets a TON of clicks and advertisers are willing to pay BIG $$$ for each click…Booya! Or, think economies of scale, it takes you very little time to register these domains and if you do them by the hundreds or thousands then the profits add up quick.
Start slow and ease into this. This formula is an estimate only, the variable that will put you in the red are:
1. Conversion rate on the parking/landing page: I see ~20% on most of mine, some higher some lower, it all depends on the matching for your keywords. To get a good idea of what this might be look at the ads that appear with your domain keyword, Are they relevant? Would you click on it?
2. Advertiser CPC, seasonality and advertisers just pulling out will affect how accurately you can predict what they are willing to pay per click.
3. Your individual cut from the parking program or contextual advertising program, this number will vary as well.
Thanks Phil for the great article!