Recently the mainstream media has been running profiles on people who have built businesses worth hundreds of millions of dollars by buying lots of Internet domain names then filling them with Google ads. Last week, CNN Money ran an article entitled The man who owns the Internet which contained the following excerpt
When Ham wants a domain, he leans over and quietly instructs an associate to bid on his behalf. He likes wedding names, so his guy lifts the white paddle and snags Weddingcatering.com for $10,000. Greeting.com is not nearly as good as the plural Greetings.com, but Ham grabs it anyway, for $350,000. Ham is a devout Christian, and he spends $31,000 to add Christianrock.com to his collection, which already includes God.com and Satan.com. When it's all over, Ham strolls to the table near the exit and writes a check for $650,000. It's a cheap afternoon....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.)...And what few people know is that he's also the man behind the domain world's latest scheme: profiting from traffic generated by the millions of people who mistakenly type ".cm" instead of ".com" at the end of a domain name. Try it with almost any name you can think of -- Beer.cm, Newyorktimes.cm, even Anyname.cm -- and you'll land on a page called Agoga.com, a site filled with ads served up by Yahoo
The New York Times has a profile on another multimillion dollar company in the same business in today's article entitled Millions of Addresses and Thousands of Sites, All Leading to One which contains the following excerpts
What Internet business has raised $120 million in financing in the last year, owns 725,000 Web sites, and has as its chief executive the former head of Primedia and International Data Group? If you guessed NameMedia, a privately held owner and developer of Web sites based in Waltham, Mass., you take the prize. ... “What we’ve wanted to do, quietly, is amass the largest real estate position on the Internet, which we feel we have,” Mr. Conlin said. Some of those properties, he said, are the equivalent of “oceanfront” sites, or high-value addresses like Photography.com or DailyHoroscope.com that NameMedia will populate with relevant editorial content. Those who type in any of NameMedia’s other 6,000 or so photography-related Internet addresses, like photographyproducts.com, will land on Photography.com....So far the company’s strategy is paying off, Mr. Conlin said, with company revenue doubling last year, to $60 million.
Companies like this are bad for the Internet for several reasons. For one, they artificially reduce the pool of domain which has resulted in legitimate domains having to choose name that are either awful misspellings or sound like they were stolen from Star Wars. Secondly, a lot of these sites tend to clog up search results especially when they have generic domain names and a couple thousand sites all linking or redirecting back to one domain. Finally, the fact that these companies are making so much money in a manner that is user-hostile and ethically questionable encourages more such businesses which prey on naive Internet users to be formed.
What I've found most shocking about this trend is that the big Web advertising companies like Google go out of their way to court these businesses. In fact, Google has a service called Google AdSense for Domains [with the tastefully chosen URL http://www.google.com/domainpark] which caters exclusively to these kinds of sites.
One of the things I've disliked about the rush towards advertising based business models on the Web is that if unchecked it leads to user-hostile behavior in the quest to satisfy the bottom line. The recent flap over Google and Dell installing the equivalent of spyware on new PCs to show users ads when they make a typo when browsing the Web is an example of this negative trend. Now it turns out that Google is in bed with domain name squatters. These are all examples of Google's Strategy Tax, the fact that they make their money from ads compromises their integrity when there is a conflict between between doing what's best for users and doing what's best for advertisers.
Do no evil. It's now Search, Ads and Apps