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MADISON AVENUE’S FEAR OF DOMAIN NAMES

December 2nd, 2007 Posted in Advertising Agencies

There’s been some focus lately regarding the domain industry “connecting” with Madison Avenue ad agencies. The theory is that if ad agencies get involved with the domain industry, they’ll somehow transmit to their large corporate clients the importance of high traffic domain names to their client’s online business.

I believe this is a wrong approach and could convince many domainers to sell their domains for much LESS than they are worth out of frustration.

Madison Avenue is out to protect their own interests, and a high-powered domain name competes directly with what an ad agency provides for their client: a vehicle that brings in consumers.

If a domain name brings in 150,000 eyeballs every month to a company’s website, and it only cost $1million, (and $8 a year thereafter) that domain has just eliminated the company’s need for spending MORE money with the ad agency to try and bring in 150,000 new consumers a month. Most likely, a million dollars paid to a Madison Avenue ad agency didn’t come close to bringing a corporate client that type of recognition and consumer contact with their product. I think a million dollars to a sub-MadisonAvenue agency means they’ll let you get through their fourteen receptionists and secretaries to talk to a “Director of Interactive Strategy”.

The value of a high-traffic relevant domain name, even if bought at a seven-figure price, is expanded over many years of that company owning the domain. Spend $1+ million for a domain in 2005, then that’s your budget for that year. But how about the benefits of that same investment in the following years? In 2007, 2008, and into the future, the company only spends $8 or less yearly on keeping the domain, yet they continue to RETAIN the powerful brand positioning, the amazing traffic, the recognition of their product, point-of-purchase positioning, and so much more. All for $1 or 2 million spent several years earlier?

There isn’t an ad agency in the world that can create a campaign, dollar for dollar, that can compete with a great domain name. One premium domain name is a workhorse of marketing for a company. Imagine if the company had more than one?

I worked for one of the top five ad agencies 15 years ago as a corporate sponsorship director, and I learned a lot about marketing and advertising and how ad agencies think. It’s fairly easy. Number One on their agenda? They DON’T want to lose their clients or get their budgets cut. Bread and butter first, baby. No ad agency wants a domain name that has more selling power than their ad campaign for the client.

Lance Podell of Seevast in a DNJournal.com article last year states that “advertising campaigns have a set budget and if a domain name is to be part of the campaign it has to fit within the budget.” He said “Advertisers will think of a name that would help them but it if costs $1 million they say “forget it!” He added that the sweet spot for ad campaigns is (domains) in the $5,000-$10,000 range.”

However, I don’t believe that any domainer who has a truly valuable domain name that is getting hundreds or thousands of visitors a day thinks that their buyer’s “sweet spot” should be $5 - $10k. It’s ludicrous to make these kind of comments, unless you’re in the game of trying to grab valuable domains for cheap.

That’s truly a revealing statement about what the ad agencies would pay for what they BELIEVE to be a domain that is conducive to the ad campaign they’re selling to their client. In other words, the ad agency wants to buy domains that sell THEIR ad campaign, NOT their client’s products/services. If you want to check this out, take a look at the domain names featured on TV commercials, magazine and newspaper ads, and on other mediums where the ad agency is calling the shots for the “new media interactive” connection for their client. The ad agency doesn’t WANT their client, who sells margarine, to own, “margarine.com”.

Podell goes on to say “If you hope to make a killing by selling to a major advertiser… that is probably a pipe dream.” He is telling you the truth, about not making a killing by selling to — a “major advertiser”. However, he’s not telling you WHY.

The DNjournal article also has Will Margiloff, CEO of Innovative Interactive stating: “Though major advertisers have bypassed opportunities to acquire category killer domains,… Madison Avenue is not ignoring domains, they simply don’t yet have an understanding of the channel.”

This is a very misleading statement. You can be assured that Madison Avenue has our number, knows about domain name benefits and very thoroughly. No industry that sucks up a TRILLION dollars a year has people working for them that don’t understand EVERY valuable marketing device, domain names included. The the ad agencies haven’t jumped heavily into buying premium keyword generic domains because they just haven’t figured out how to make the domain name work for THEM for a profit. (There is a way, but I’m not telling)

The truth of it is that Madison Avenue doesn’t want domains to compete with their abilities as an ad agency and undercut their client’s ad budget… pure and simple.

In the same DNJournal article, another ad executive, Bill Lickson of Zimmerman Advertising stated that advertisers remain focused on their brands rather than the generics that define their business. “Starbucks.com is not Coffee.com because their brand allows them to charge $5 for a cup of coffee.” Notice how he says “advertisers” remain focused on their brands, not the companies who hired the advertisers.

However, Lickson conveniently suggests that Coffee.com would be a great domain media property to build out for “information” and whatever. I saw his misdirect immediately. Look closely, and you will see it too. Obviously, the ad agency representative would rather have domainers “BUILD OUT” our domains than sell them to their clients or their clients’ competitors and create new marketing media outlets that undercut their ad agency. As far as Coffee.com goes, BAM! Peet’s Coffee (PEET - NASDAQ) is relishing in the tsunami of typeins that end up at their website, and Starbucks is NOT the king of coffee land on the internet.

Beyond my own experience, I did a a lot of research to support my “theory” of why Madison Avenue doesn’t want domainers around. I chose Johnson & Johnson as my test subject because for at least two years, they’ve been the most obvious company smart enough to cash in on a domain name, BABY.COM. Rumors have them buying this domain for $1.5 mill or somewhere thereabouts, I’m not sure. (if anyone has the true sale price, please post it).

J&J has done an incredible job proving to the ad agencies (and to a few other large corporations with smart marketing directors), and more importantly, to the domain industry, that a domain name can actually can become a brand and save a company millions of dollars in advertising. How much does an ad agency charge to do the very same thing? A lot more than the cost of a million dollar domain name.

In the article I found, published in BrandWeek November 2005, Johnson & Johnson was being heralded as a smart company for their innovative marketing approach, paving the way to the “new media” future of advertising.

Then towards the end of the article, a comforting comment for the ad agencies appears from the VP of Corporate Affairs at J&J:

“I don’t think Madison Avenue should feel threatened. I think Madison Avenue should feel we’re looking for more creative solutions.”

That statement is KEY to my argument. The article doesn’t directly address the “fears” of Madison Avenue regarding domains, but it does state: “The (J&J) commercials conclude by urging viewers to visit BABY.COM.” Hmmm… what a nice BRAND!

Today, many ads you seen on TV or magazine or online, if it has to do with babies and Johnson & Johnson products, the company’s domain is rarely featured — instead they show you BABY.COM. Yes, a multi-billion dollar a year company is USING A DOMAIN NAME AS A BRAND!!! It’s a clear indication that this huge corporation has wisely branded a domain that represents one of their biggest markets.

It seems that a company as large as J&J, with an ad budget of $1.3 BILLION a year, actually understands and appreciates the benefits of a good domain.

Additionally, Andrew Miller of INTERNETREALESTATE.COM said in an article over a year ago: “We are in an inclining market. There is no better place to build a website or online business than on a generic domain name, they are the ‘Madison Avenue or Rodeo Drive’ of the Internet. Every category leader should eventually own their category generic domain name address ” added Miller.

Miller his talking about the value of domains here, because he’s setting up the marketing reality that domains control. It’s naive to think Madison Avenue could ever be a source for the domain industry to approach to help us sell our domains for the values they really are worth.

The real value of our domains is to get them to the end-user (businesses), and have them fighting over ownership of domains that define their generic products and services. The parking services don’t like to hear anything regarding how to sell your domains to end users, but the parking services should be implementing a 3% commission on domains sold through their parked pages. Why not? I support that and I think it’s fair that Domainsponsor or TrafficZ and Fabulous or Parked.com should get some minimum commission for listing your domain for sale on their landing pages. Sedo gets 10%, and they host a parking service. Nothing wrong with that.

Unless you’re one of the lucky 200 domainers who make over $50k a month with their domains, it is IMPERATIVE that every domainer pushes to make their generic descriptive NICHE category domains valuable. I’m not going to tell you how to do that here, but there is a way… I promise you.

There is a path that the domain industry can take, beating down brush and swatting jungle bugs and avoiding snakes, all the while crossing raging rivers and climbing mountains to get to “Domain Shangrila.” Sometimes it seems it’s way off in the distance, and then it seems just at our fingertips. I know what this path is, and am working with others to get the expedition organized and moving along this path… please contact me if you want to be involved. It will be revolutionary.

In the meantime, I can tell you that Madison Avenue isn’t going to give you an oar to paddle upstream to get there nor feed you along the way. However, others will… stay tuned to find out WHO!

The link to the article on J&J: [url]http://www.brandweek.com/bw/news/pharmaceutical/article_display.jsp?vnu_content_id=1001525482[/url]