"Direct navigation traffic" is Web site traffic driven by users searching via domain name rather than a search engine. One in 6 searches are conducted this way, and it accounts for 10% of Google's search engine revenues.

Jupiter Research has called it "the largest untapped marketing for paid search advertisers and agencies." According to The New York Times, direct navigation traffic is the "best kind of traffic for Websites." Many of these sites drive significant value to visitors and comprise of valuable virtual real estate advertisers need to capitalize on. It's one of the reasons driving explosive growth in the secondary domain name market, where companies and content providers are spending 5-, 6- and 7-figures for the right domain name.

Yet, Google is now giving its AdWords advertisers the option of excluding their ads from websites geared at collecting this direct navigation traffic -- "parked Web sites." Instead of excluding the entire parked domains network from their advertising campaigns, which eliminates the ability to drive significant qualified traffic, advisers might consider selectively excluding certain sites that perform poorly.

Research by WebSideStory indicates that domain name traffic is nearly twice as likely to produce ad conversions than search engine traffic. Now, with the ability to eliminate the bad, it is expected that number will rise over time. To help with the weeding out process, AdWords users can also now track the success of channels through "Placement Performance Reports." Now, advertisers using Google AdWords are seeing the success of the domain channel, including the following testimonial from Garden State Life Insurance pulled directly from the Google Content Network:

"Before Placement Performance reports were available, I would have assumed that ads on domain pages perform very poorly and don't offer very much to the visitors who stumble across them. But upon viewing the report, I noticed many websites were converting very well. So I blocked the poorly performing websites from showing our ads. Then I increased our overall budget on the sites that were converting well by 50 percent. Now, about 60% of sales from our content campaigns come from the domain pages. The acquisition cost of our domain ads is about a third of our non-domain content ads and about a half of the cost of our search network ads. Ads that appear on parked domain pages produce very qualified traffic, and that traffic converts on our website in a similar manner to our search network traffic."

--Michael Musselman, Garden State Life Insurance

Leveraging these reports help separate the good from the bad, and better understand how much value high performing domains can drive. Some drive so much quality traffic that it makes economic sense to purchase the domain outright to capture the natural traffic and eliminate advertising spend in that area. Marketers use these domains in three key ways:

1) Simply re-direct the domain to your main site. Some examples of this: Books.com (Barnes&Noble), PC.com (Intel), Loans.com (Bank of America), Gift.com (JC Penny) and RentalCar.com (Enterprise).

2) Use the domain as a targeted vertical portal to drive traffic to your main site. This method requires more effort but is more likely to lead to increasing traffic over time, will likely generate higher conversion rates, and strengthens your position as a leader in a given market category. Examples: Baby.com (Johnson & Johnson), ResetlessLegs.com (GlaxoSmithKline), DepressionHurts.com (Eli Lilly), DesignatedDriver.com (Budweiser), NoFleas.com (Bayer), Meals.com (Nestle), and Malts.com (Diageo).

3) The most extreme example: re-brand your entire operation on the new domain. Examples: DealTime and Epinions become Shopping.com; Ice.com becomes Diamond.com; DynamicWeb becomes WebHosting.com.

Google's decision provides a great opportunity for advertisers to analyze their domain driven traffic like never before. Many will find that this traffic drives higher conversion rates that can now be improved further, and in some instances, domains that are too valuable not to own outright.

This commentary is insightful. I recommend it to others.