July 22, 2005

According to VeriSign, the company that administers top-level .com and .net domain names, the sheer number of websites that are launched uniquely to test PPC ads from Google and Yahoo is sky-rocketing.

In fact, VeriSign's chief executive Stratton Sclavos says there are close to a quarter of a million domain names being registered every week for only a few days, while search marketers "analyze and test" the traffic potential of those domains before simply discarding them.

The news came as VeriSign reported a 74% increase in revenue for the second quarter. It came in at $445m. Net income almost doubled to $41m over the same period last year.

Sclavos said that the company will change the way it reports the size of its domain name business, in terms of active registrations, because of the amount of speculation going on. It will reduce the size of the reported registrations by about 2%, he said.

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"Names are being bought and then tested against traffic analyzers," Sclavos said. "The ones that can generate more than the $6 or $7 [registration] fee per year are kept, the other ones are returned within the five day grace period."

These speculators basically put up collections of Google Adsense or Yahoo Overture text advertising links that are more or less relevant to the topic indicated by the URL. Whenever someone comes across the site and clicks a link, the owner gets paid.

Because domains can be bought very cheaply nowadays, speculators only need to make dollar revenue in the single figures per domain per year to get a return on their investment. If they register enough names, it can produce a sizeable income.

And because domain registration rules have a five-day "Add Grace Period", during which new registrations can be deleted for a full refund, it's causing speculators to register hundreds of thousands of names for very short periods.

"At the end of Q4 we probably saw about a 40,000-50,000 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 is was about a 700,000 name difference," Sclavos said.

"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," he said.

There were 44 million .com and .net domains, under VeriSign's new accounting method, at the end of the second quarter, the company said. That was a net increase of 2.8 million names, a 7% sequential increase.

Source: Computer Business Review

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