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Monday, February 18, 2008

Is Your Registrar's Multi-year Deal Worth It?

Almost every domain name registrar out there is offering a deal these days: pay up front to register your domain name over a multi-year period and save money. The question that my clients and colleagues alike invariably ask is whether or not these deals are worth it.

My answer: Maybe.

Realistically, whether or not a multi-year registration is worth the cost depends on a lot of variables. For instance, the first question I ask is "Will you still have a website in 5 years? What about in 10?", and, "If so, do you think your business' name will be the same as it is now?"

Usually the blank stare is enough to tell me that a 10 year deal is probably not a good investment. But let's assume for a second that my client knows for sure that her online venture will still be up and running 5 or 10 years from now. Is it still a good deal? Well, then it all comes down to finances.

Common Knowledge and Misconceptions
Of course it's your registrar's duty to make you think that you're making out like a bandit when you opt-in to a multi-year deal, which is why it likes to tell you what percentage you're saving if you take the multi-year option: "Save 50% with a 10 year plan!"

50% of what? Indeed, that is the question. By making some quick calculations it's usually pretty easy to see that you're saving when compared to 10 years at the full price (whatever that may be). What your registrar doesn't want you to know is that you may not be saving as much as you think.

Anyone who has been subjected to a collegiate finance course can tell you that $1 is worth more in the future than it is today. How is that possible? Well, imagine that you have $1 right now, and you put it into a high-yield savings account that has a 4% annual yield. A year from now your $1 will be worth $1.04. Hence, your $1 will be worth 4 cents more a year from now than it is today.

We can use a similar approach to figure out what $1 in the future is worth today. Again, let's imagine that the current annual interest rate on a high-yield savings account is 4%. We would like to know how much to deposit today in order to have $1 a year from now.

$1/1.04 = $0.96*
(*rounded to two decimal places)

So, we'd need to deposit 96 cents into our high-yield savings account in order to withdraw $1 a year from now. $0.96 is the present value of $1 in one year if the current interest rate is 4%.

Multi-year Discounts and Present Values
Now let's use what we know about present values to determine whether or not we're getting a good deal.

As of today, Register.com is offering multi-year registration of top-level domains at the following prices:

1 year: $35
2 years: $70
5 years: $149
10 years: $249

Clearly, the alternative to purchasing one of these packages is to simply pay the regular price of $35 per year. But, as we already know, $35 is worth less today than it will be in the future, so we need to know what the present value of making a $35 annual payment is over several years, keeping in mind that we'll be making our payment at the start of each annual period. The current annual yield of a business savings account with ING Direct is 3.75%, so the present value of $35 paid annually with an interest rate of 3.75% is:

1 year: $35
2 years: $68.73
5 years: $162.80
10 years: $298.23

From this we can see a few things:
  1. We will indeed save money if we opt for the 5 or 10 year plan. However, we are not saving as much as Register.com would like us to believe (for instance, we're really only saving $49.23 rather than $101 by going with the 10 year plan).
  2. We actually lose money by taking the 2-year plan.
Point #2 is important to note, as most of us would simply think that paying $70 for 2 years up-front is the same as paying $35 now and $35 a year from now, but it is not. Instead, we could pay $35 now and put $33.73 into a high-yield savings account earning 3.75% interest. In a year we'd have $35 which we could use to pay for another 1-year contract. Thus, our second year really only costs $33.73 rather than $35.

Deal or No Deal
In this case we see that the longer-term deals (5 and 10 years) with Register.com are certainly money-savers right now, but will they always be? Maybe, maybe not.

In our analysis above we assumed two things:
  1. The annual registration fee will remain constant at $35 over the next 10 years.
  2. The annual interest rate of our high-yield savings account will remain constant at 3.75% over the next 10 years.
If both of our assumptions remain true over the next 5 or 10 years, then we know that we've saved money by taking the multi-year deal. But what if we take the multi-year deal and one (or both) of our assumptions prove to be false? Let's find out what happens...

What happens if the annual registration fee changes?
If we take the multi-year deal and the registration fee changes then we may not have made a good deal. If the annual fee goes up, then clearly we'll have saved even more than we'd initially thought over the contract term. However, if the annual registration fee goes down, then it's certain that we're saving less than we initially thought, and it's possible that we're actually losing money over the course of the contract. It all depends on how much the annual fee goes down and how far into the contract term we are. Generally speaking, smaller price changes will have a greater impact earlier in the contract than they will later.

What happens if the annual savings yield changes?
Similarly, if we take the multi-year deal and the annual yield of the savings account changes, then it is possible that we've not made a good deal. Generally speaking, if the interest rate goes down then we'll have saved more money with our long-term contract than we initially thought. But, if the interest rate goes up then it's certain that we're saving less than we initially thought, and it's possible that we're actually losing money. Again, this depends on how much the interest rate goes up and how far into the contract term we are. And, just like price changes, smaller interest rate changes earlier in the contract will have a greater impact than the same changes later in the contract.

What happens if both the interest rate and the registration fee change?
Once again, the extent to which our potential savings is affected depends on how much each changes. If the interest rate goes up AND the registration fee goes down, then the two effectively compound and we'll have saved far less money than we initially thought when we signed the multi-year contract. However, if the interest rate goes up but the registration fee also goes up (or if they both go down), then it's possible that the two changes will simply cancel each other, and the net savings will be comparable to the deal we had initially.

Other Risks of Multi-year Deals
There are certainly other risks associated with multi-year domain registration contracts that go beyond interest rates and registration fees. Chief among your concerns should be the longevity of your potential registrar, however there are other things to consider as well. Be sure to read your contract carefully, as there may be additional fees incurred for certain services, and the terms of the contract might make it painfully difficult and costly for you to get out of the deal if it goes south (or if you find a better deal...).

At the end of the day, the question of whether or not you should engage in a multi-year domain name registration will depend largely on your firm's goals over the next 2 to 10 years, while the financial implications of a long-term deal may not be the first thing that comes to mind. Nonetheless, it is important to take those financial concerns into consideration! If you're unsure about it right now, stick with a yearly renewal plan. After all, you can always decide at a later date to go with a long-term commitment.




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Tuesday, February 12, 2008

Piping Up About Yahoo! Pipes

Syndicated content is, in my opinion, the boon of the Web 2.0 age. Both casual and power internet users incorporate feeds into their daily lives - some without even realizing it. Syndication allows us to quickly and easily get the up-to-date information that we want or need with a minimum of effort (given readily available consumption mediums such as desktop readers, mobile devices, web browsers, and email clients).

Of course, syndication does have its downsides. One problem is that of "over-subscription", meaning that a feed consumer is subscribed to more feeds than he can possibly read in a reasonable amount of time. Couple with this problem the fact that many feeds contain the same (or very similar) content, and it's easy to see why the novelty wears off for most users. Add, just for fun, the fact that most people who subscribe to syndicated content do so through different consumption media, and the world of syndicated content consumption becomes a mess rather quickly.

Take my father-in-law, a devout New England sports fan, for example. A recent inspection of his home computer revealed that he is subscribed to several different sports-related feeds, including: 1 feed for score updates, 1 feed for news, and 2 editorial blog feeds. I suspect that my father-in-law has also subscribed to these same four feeds on his computer at work. So, in total, he has loaded eight separate URLs and clicked on a "subscribe" link (or icon) eight separate times in order to get his daily sports fix, which seems like a lot of work.

Shouldn't there be an easier way?

Enter Yahoo! Pipes

If you've never heard of Yahoo! Pipes, you're probably wondering what it is exactly. Put simply, it's a way to aggregate (and/or manipulate) content from multiple sources, and output that content to a single source. Anyone with a Yahoo! account can create new Pipes, and the surprisingly intuitive drag-and-drop interface makes it as easy as can be to aggregate content from multiple sources.

For my father-in-law, I fetched the sports news feed from ESPN, scores from totallyscored.com, and his hometown team blogs from the Boston Globe. With the data in hand, I filtered the ESPN feed to include only news for his teams and sorted all of the data by date (most recent first). Then, I simply saved and published my new Pipe, and it was all ready to go. But, to make my new Pipe easy to remember, I used Yahoo's convenient pipe naming feature... so now I can always find it at http://pipes.yahoo.com/driscollwebdev/newenglandsports

So now my father-in-law only has to put one address into his feed reader in order to get caught up on his teams' news, scores, and editorials. Truthfully, though, I haven't even gotten to the part where Pipes shines.

Let's say that my father-in-law decides that he wants to add another blog and another news feed to his syndicated content. Under the old regime, he would have to subscribe to each in all of his feed readers, meaning that he would have to type the URI into his browser and then click 'Subscribe' at least twice (four times if we assume that he'll do it at work too).

But with Pipes, all he has to do is log in and add the URI to the list of feeds already aggregated in his Pipe... and that's it. There's nothing else to subscribe to because he's already subscribed to the Pipe - so the new data will just start flowing in to all of his reader applications!

From a developer's perspective, Pipes is a great shortcut for the kind of work that would normally take up quite a bit of time. Rather than spending time creating the code to filter, sort, and format syndicated content from multiple sources, we can simply retrieve our new Pipe's RSS feed and use the pre-formatted, pre-sorted, and pre-filtered data in whatever manner we choose. This allows us to focus more on building a cool application (a Boston-sports-skinned SpringWidget perhaps), and less time worrying about data cleanliness.

I've only really scratched the surface here of what Yahoo! Pipes can do - I highly recommend that you give it a try for yourself. If you want to see some examples of our Pipes, you can check them out at http://pipes.yahoo.com/driscollwebdev.

Brian

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Saturday, February 2, 2008

It's a Web 2.0 World, baby, and you'd better get on the bus now before you (and your revenue generating properties) miss out!

You're a small business owner. Your business has a website. You have children.

You could learn a thing or two from your children about how to make the most of your company's presence on the web.

How?

First, an aside: you've probably heard about this whole "Web 2.0" business the last couple of years. But how many times have you heard it defined? Do you really know what Web 2.0 is? Do you know what it stands for?

In its simplest sense, the term Web 2.0 simply conveys the message that the World Wide Web has come a long way since its humble beginnings. From a developer's perspective, Web 2.0 defines websites that are standards-compliant and optimized for interoperability (there's a lot that goes into both aspects, but we'll skip that for now). From a user's perspective, Web 2.0 defines the ability to create and share content from multiple sources, whether it be a blog, a news feed, photos, music, or just about anything else that can be served up online.

It's probably no big surprise that the 18-24 demographic represents the largest proportion of visitors to Web 2.0 sites like YouTube, Flickr, and Wikipedia according to Hitwise, a market data research firm that specializes in internet marketing. Further, research from Avenue A | Razorfish suggests in its Digital Consumer Behavior Study that 55% of online consumers rely on user reviews to determine whether a product or service is worth purchasing.

Of course, many big companies have taken advantage of the opportunities to reach the wide audiences of the aforementioned sites, as well as social networks such as MySpace and Facebook. Smaller outfits that lack the advertising budgets of the retail giants have used sites like YouTube, MySpace, Facebook, and Flickr to their advantage by creating profiles, uploading "soft" ad videos, uploading photos of new products (or even better, uploading photos of people using those products), and creating social groups around their products and services. And, many companies have also managed to attract a following of Friends on social networking sites.

The true advantage of these types of sites is that they allow users to leave comments for other users pertaining to photos, blog entries, videos, you name it... so, it's likely that a user who has purchased a product from a certain company will leave a comment for that company on its social networking profile. And, it's likely that the comment will be an ad-hoc review of the product. With the assumption that the review is positive, this will serve effectively as a public endorsement for your product. Collect a few such comments, and don't be surprised when traffic to your company's website begins to pick up.

Of course, in order to take full advantage of all the marketing opportunities that this Web 2.0 world has to offer, you have to have the time and ability to create your own user-created content on Web 2.0 sites. This is where your kids (or your neighbor's kids) come in: chances are that they are well-versed in the lingua franca of these sites already, and they could probably give you quite a tutorial.

-DWD Staff

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