FairWinds recently released a study that calculated the cost of typosquatting for the brands behind the 250 most highly trafficked websites.  The total included costs from visitor acquisitions, lost sales and impressions and also recovery of typosquatted domain names, and came out to $327 million per year.

A major source of losses for brand owners is pay-per-click (PPC) sites; when a company invests in paid search, its ads appear on PPC and other websites in addition to the search engine’s results pages.  When an Internet user clicks on the sponsored link, either on the search engine site or another site, the company pays a click fee.  When an Internet user makes a typo or keystroke error while trying to reach a brand’s website and lands on a typosquatted domain site that is leveraging PPC to monetize traffic, we have found there is an 18% chance he or she will click on the targeted brand’s link (meaning the brand suffers a loss in the form of a click fee for gaining the visitor) and a 7% chance he or she will click on a competitor’s link (meaning the brand suffers a loss in the form of diversion while another advertiser pays the cost-per-click (CPC) and picks up the visitor).  The formulas that we used to calculate those losses are as follows:

For users who click on the targeted brand’s link:
18% x (Annual traffic per domain) x (Average CPC) = Advertising costs for the target brand

For users who click on a competitor’s link:
7% x (Annual traffic per domain) x (Average CPC) = Advertising costs for the target brand’s competitor

Originally in our calculations, we used an average CPC of $2.74 for each formula.  Given that we could calculate the CPC for the specific keywords in this study of 250 sites, we leveraged today’s Google estimates for each keyword CPC rather than looking at an historical average for a broad range of keywords.  Because there was a range of CPC and traffic values that could have created bias, we then extracted the weighted average CPC across the dataset.  We determined that $2.03 was the weighted average CPC for all the sites included in our study and therefore, $2.03 is the actual cost the site owners incur when a visitor lands on a typosquatted parked page and clicks on their link. Ultimately, this is the amount of money paid by the advertiser and shared by the contextual Internet advertising provider and the owner of the domain (and sometimes an intermediate party such as a domain parking company).

Obviously, this reconsideration alters our final calculation somewhat.  With the new average CPC, the total cost from ad clicks on typosquatted PPC sites in our study is $187,288,458 per year.  When added to the costs of lost sales and impressions, plus domain recovery costs, the re-calculated total cost of typosquatting is $364,276,874 per year.

If it’s not already apparent in the scope of this study, this figure applies to the 250 sites that we studied, and is not a comprehensive measure of all typosquatting (that figure would obviously be much greater).  To read the updated paper with an in-depth discussion of the damage that typosquatting inflicts on the 250 most trafficked websites, visit the FairWinds site for the entire paper, or the revised section for a discussion of how we calculated the sample set CPC.