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Internet Commerce Association, Direct Navigation white paper

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Direct Navigation Document Transcript

  • 1. ICA Growth & Sustainability of Direct Search Traffic An Industry Survey Conducted by the Internet Commerce Association on Traffic Trends in the Direct Search Industry Internet Commerce A S S O C I A T I O N www.InternetCommerceAssociation.com
  • 2. ICA Growth & Sustainability of Direct Search Traffic ................................................................................................................................................................................ Executive Summary The Internet Commerce Association (ICA) completed an industry research study on the impacts of the Direct Search business and the consistency and sustainability of the traffic. Study included an analysis on multiple domain portfolios that represent over 30 million unique visitors per month. Findings included: Average direct search traffic grew at a 35%+ compounded annual growth rate (CAGR) between 2002-2006. Direct search is a long-term, sustainable source of quality traffic. Two-thirds of the world’s 1+ billion Internet users arrive at web sites via direct search. At the time of publishing this report, Microsoft has announced that over 100 million copies of IE7 have been downloaded which repre- Direct search sents approximately 20% browser market penetration. Changes to the industry comprises browser (such as browser modifications released in IE7) do not appear to have an impact on direct search traffic: in fact, direct search traffic is 6-9% of paid still exhibiting substantial increases after IE7 was released. search market Internet Commerce www.InternetCommerceAssociation.com 2 A S S O C I A T I O N
  • 3. ICA Growth & Sustainability of Direct Search Traffic ................................................................................................................................................................................ Background What is Direct Search? Direct search, often called direct navigation or “type-in traffic,” is the term used to describe the act of searching within the navigation bar instead of within a search tool. A consumer bypasses a search engine, types a search term as a URL into the browser address bar, and ends up at a site specifically designed for that topic. It is estimated that more than 67% of daily Internet users worldwide arrived at web sites via direct search in 2004 compared to about 53% in February 2002 (WebSide Story’s StatMarket division). The reason two-thirds of Internet users opt for direct search is because it is effective. For example, if a consumer was looking for a personal loan, he might go to a search engine and type "personal loans" into the search box. He would then have to sort through a list of links – some relevant and some not – that contain that term. Direct search users would simply type "PersonalLoans.com" into their browser's address bar to get special- ized information delivered instantly. Business and consumers locate a site for the first time using direct search between 51-59% of the time. - VeriSign, 2005 Internet Commerce www.InternetCommerceAssociation.com 3 A S S O C I A T I O N
  • 4. ICA Growth & Sustainability of Direct Search Traffic ................................................................................................................................................................................ Background There are only three ways to get traffic to an Internet site: Through search engine leads (Google, Yahoo, Ask.com, etc.) Links from other web sites Direct “type in” traffic (words or phrases typed directly into the navigation bar of the browser). Domain names are the source of this very high-quality traffic. Search Engines Direct Search Link Traffic (Google, Yahoo) (www.shows.com) (Shows.com Ticketmaster.com) Online Traffic: Over 1 Billion Users Worldwide Internet Commerce www.InternetCommerceAssociation.com 4 A S S O C I A T I O N
  • 5. ICA Growth & Sustainability of Direct Search Traffic ................................................................................................................................................................................ Background continued Of these three navigation methods, direct search is one of the most pure and targeted form of traffic on the web, and considered by many to be one of the best performing search segments that drive the Internet. Direct search is not about every person on the net beating a path to a single mega-site on the same day, but rather a broad audience of users with fragmented interests visiting thousands of small micro-portals each day that collectively reach millions of people. “Think of Direct Search as a 'reverse search engine' where rather than one web- site with a search box reaching millions like Google, you have thousands of small, special interest websites each getting a handful of visits, but collectively bound together into a network and reaching millions of people," says Frank Schilling, managing Director from Name Administration, Inc. Direct Search for Advertisers The popularity of individual search engines continues to change over the years, but generic and memorable domain names have been a constant since the earliest More than 67% of days of the commercial Internet. In fact, a growing number of Internet users use direct search as their preferred method of locating the information they need. daily global Internet For this reason, Web-based businesses often register or buy generic domain users arrived at Web names related to their primary line of business to capture traffic from users who sites by direct search use their browser as a navigation tool. Generic domains that are closely related to significant commercial web activities can provide a stream of enduring free traffic in September 2004, to the holders of those domains. (Susquehanna Research 2005) compared to about 53% in February 2002 Domain names also have defensible ownership over this traffic. Any time an individual enters the domain name, that individual winds up on the site created - WebSide Story’s StatMarket division under the domain name. As Internet usage increases, and as advertising dollars continue to flow to the Internet, the value of this direct search traffic increases, as does the value of the underlying real estate. Domain name valuations are thus expected to grow with, if not in excess of, the overall increase in e-commerce revenues. Internet Commerce www.InternetCommerceAssociation.com 5 A S S O C I A T I O N
  • 6. ICA Growth & Sustainability of Direct Search Traffic ................................................................................................................................................................................ Direct Search for Advertisers Continued For advertisers looking to reach a high-quality, targeted audience, this direct search traffic is considered one of the best quality traffic, since the visitor directly typed in what they were looking for, did not arrive at the site while “surf- ing” or while exploring a link from another site, and did not arrive from a search engine where the user is typically comparing a variety of competitive sites. 4.23% Certainly, such a targeted audience Conversion-to-Sale Rate is a boon for advertisers trying to Direct navigation had a 4.23% conversion- Domain industry to-sale rate, while search engine clicks on reach specific segments. Advertis- average lead to a 2.3% ers are placing more and more ads revenues are - Susquehanna, August 2005 on direct search sites in hopes of currently $600 2.30% reaching millions of high-quality, million and will largely untapped consumers. In 2006, RBC Capital estimated that reach $1.2 billion 0.96% direct search in the US would within three years. generate US$650 million in adver- - RBC Capital Markets, 2006 tising revenues, which is approxi- mately 6-9% of paid search Direct Navigation Search Engines Internet Links revenue. As global Internet usage continues to rise and as consumers increasingly trust the amount of relevant information available on web sites with descriptive names (e.g. bands.com, creditreports.com, carrims.com), the direct search market is poised to grow at a rapid rate. According to Susquehanna Research, direct search could be a $1 billion market in 2007. Direct Search: Quality Traffic for Advertisers Users locate a site for the first time using direct navigation between 51-59% of the time (VeriSign, 2005) Market is 6% of the search advertising market; growing at 35% a year The last scaled source of “primary traffic” where Internet Users start their session. Internet Commerce www.InternetCommerceAssociation.com 6 A S S O C I A T I O N
  • 7. ICA Growth & Sustainability of Direct Search Traffic ................................................................................................................................................................................ Sustainability / Growth - Case Study With Detailed Findings ICA completed an analysis on organic growth of direct search portfolios from 2002-2006 to understand traffic trends. Data set shows robust traffic consistency and growth over a wide range of domain names and the ICA analyzed over 100,000 web property sample set. Compound annual growth rate (CAGR) on direct search portfolio demonstrates traffic growth of >30% CAGR from 2002-2006. Sample data set is representative and statistically significant for the entire universe of the 5-7M .com domain name market that consistently generates direct search traffic. Direct Search Portfolio 2002-2006 Organic Growth 30,000,000 25,000,000 20,000,000 Page Views 15,000,000 10,000,000 5,000,000 0 Jan 2002 Mar 2002 May 2002 July 2002 Sept 2002 Nov 2002 Jan 2003 Mar 2003 May 2003 July 2003 Sept 2003 Nov 2003 Jan 2004 Mar 2004 May 2004 July 2004 Sept 2004 Nov 2004 Jan 2005 Mar 2005 May 2005 July 2005 Sept 2005 Nov 2005 Jan 2006 Mar 2006 May 2006 July 2006 Sept 2006 Nov 2006 Internet Commerce www.InternetCommerceAssociation.com 7 A S S O C I A T I O N
  • 8. ICA Growth & Sustainability of Direct Search Traffic ................................................................................................................................................................................ Representative Search Portfolio 2002-2006 1,200,000 1,000,000 800,000 Page Views 600,000 400,000 200,000 0 Jan 2002 Apr 2002 July 2002 Oct 2002 Jan 2003 Apr 2003 July 2003 Oct 2003 Jan 2004 Apr 2004 July 2004 Oct 2004 Jan 2005 Apr 2005 July 2005 Oct 2005 Jan 2006 Apr 2006 July 2006 Oct 2006 Internet Commerce www.InternetCommerceAssociation.com 8 A S S O C I A T I O N
  • 9. ICA Growth & Sustainability of Direct Search Traffic ................................................................................................................................................................................ Representative Search Portfolio 2002-2006 30,000,000 25,000,000 20,000,000 Page Views 15,000,000 10,000,000 5,000,000 0 January February March April May June July August September October November December 2006 2005 2004 2003 2002 Internet Commerce www.InternetCommerceAssociation.com 9 A S S O C I A T I O N
  • 10. ICA Growth & Sustainability of Direct Search Traffic ................................................................................................................................................................................ Proof That Direct Search is Growing and Sustainable Why future changes to the browser bar will not limit direct search The ICA completed a research project to understand if the browser bar changes embedded within Internet Explorer 7 (IE7) would have an impact on direct search traffic or user behavior as it relates to internet search preferences. At the time of the report, Microsoft has announced that over 100 million copies of IE7 have been distributed, making it the second largest browser to IE6. Results: The research study empirically shows that there have been no statistical changes in the amount or quality of direct search traffic with the browser changes released in IE7 As long as people have the ability to type Google.com, Allrecipes.com or ESPN.com into their browser's address bar, they will also be able to type Antarctica.com, CreditReports.com or Information.com into that same address bar. “Path dependency” associated with direct search (typing a search phrase with an extension – primarily .com) is a consumer behavior that has developed since the beginning of the Internet - it very difficult to change an established consumer behavior. Internet Commerce www.InternetCommerceAssociation.com 10 A S S O C I A T I O N
  • 11. ICA Growth & Sustainability of Direct Search Traffic ................................................................................................................................................................................ Why future changes to the browser bar will not limit direct search Continued Data analysis Compared “pre” IE7 period with “post” IE7 period (12/05 to 12/06) for a meaningful sample size of over 100,000 domain names representing approximately 15M page views per month. Portfolio traffic sources: 83% of the traffic was from direct search, 13% is from link traffic, 4% from search engines Used server log file data Results: Traffic from the aggregate portfolio grew 12.3% between the two time periods. There was approximately the same amount of traffic from IE (in aggregate) between the two sample sizes (77% in 12/05 and 75% in 12/06) There was approximately the same traffic from IE7 as the macro Internet traffic data suggests. Approximately 15% of total traffic from the sample portfolio was from IE7, which corresponds to the approximate broad adoption of IE 7 (WebSide Story released a statement on 12/7/06 that IE7 was at 16.29% US market share usage) No statistically significant variations were noted between or among traffic trends and IE7. Data suggests that IE7 does not have an impact on the growth or trends in direct search traffic. Search Engine 4% Link Traffic 13% Traffic Sources Direct Navigation 83% Internet Commerce www.InternetCommerceAssociation.com 11 A S S O C I A T I O N
  • 12. ICA Growth & Sustainability of Direct Search Traffic ................................................................................................................................................................................ Overall Result Guidance Provided by ICA Leadership About the ICA The Internet Commerce Association is a business organization made up of individuals and companies that own, buy, sell, resell, host and manage Inter- net traffic which comes from search engines, domain names and Internet links. The ICA represents a consortium of members that collectively own and control more than 2,000,000 internet properties and over 120M visitors per month. (www.internetcommerceassociation.com) Management Jude Augusta, Executive Director Phil Corwin, Butera & Andrews, Counsel Direct search could exceed 1 billion in ad revenue by 2007. Board of Directors - Susquehanna Financial, Frank Schilling, Name Administration 2005 Jeremiah Johnson, Sedo Juan Calle, Straat Investments Josh Armstrong, Oversee.net Bob Martin, Internet REIT Rick Schwartz, World Association of Domain Name Developers Ron Jackson, Independent Member from DNJournal.com Internet Commerce www.InternetCommerceAssociation.com 12 A S S O C I A T I O N