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The end of the "Google-age"?
Thursday, February 28. 2008
I've often heard industry insiders say that the strong growth in worldwide domain registrations was heavily linked to Google's own stellar performance. As the leading provider of online advertising through its various pay-per-click (PPP) schemes like Adwords and Adsense, Google has been creating value for domain names registrants worldwide, especially domainers.
Domainers –to me the term has no derogatory overtones, it just describes the perfectly legitimate business of dealing in domain names on a professional basis – have been profiting from the success of PPP systems because as they drive traffic to their names, paid adverts mean they can monetize that traffic. Following that logic, the higher a name's traffic-generating potential, the more it's worth.
So as the PPP market leader, Google has been instrumental in putting many domainers in Ferraris and luxury waterfront properties.
But… "On the day Google starts coughing, you'll see domainers getting sick." Is this oft-bandied "expert" prediction true? We may be about to find out…
If you've been following Google's share price, you'll know that it's been headed in just one direction since the company's floatation in 2005. Up. The shares that started trading below $100 reached a high of $747 in November 2007.
But since then, they've had the floor fall from under their feet. Cut a long story short: Google's stock has lost nearly 35% of its value since that November heyday. Part of the reason is the current state of the economy, which also seems to be affecting Google as consumers who have less to spend tend to click less on Google's paid adverts (by far the major source of Google's income). A ComScore report out this week showed that clicks were down in the US this January compared to a year ago, albeit by an infinitesimal amount (0,3%). The problem is that previous numbers showed strong growth (12% year-on-year in December 2007 for example)...
The numbers do need to be taken with a pinch of salt. Not only is Google apparently generating more money from these fewer clicks as it concentrates on higher quality advertisers and also refines the effectiveness of its ad systems by looking at things like ad space optimisation. But the online ad business actually seems to be picking up in February. And ad revenue remains strong in Europe.
So maybe what first sounded like a cough is actually just the Internet search giant clearing its throat. But it will be interesting to see what effects, if any, the current downward trend in Google shares has on domaining.
My guess: none. I actually expect that even if the US does dive into recession, this will help online advertising against more "traditional" forms of advertising as companies turn to the most efficient means of finding customers. And today, that is without doubt the Internet. Google's Sergey Brin seems to agree. A few weeks ago, he told the Financial Times that although he couldn't predict how Google would navigate a recession, as the company had never faced one before, there was the precedent of the 9/11 aftermath, when airline advertising slumped… except on the Internet, as airlines sought the best return possible on their advertising investment.
So doomsday merchants aside, it may be a little premature to suggest that the domain industry's golden age is over.
