I'm assuming you are reading this because you have your htaccess in place, and you're sending your lost traffic to a specific place (either to a sponsor which allows this type of traffic, or to a page of your own design) in hopes of making it more profitable.
I am going to briefly discuss a few things you may find helpful when deciding what to do with your 404 traffic.
I think the most common idea is summed up with the phrase "404 hell". Many of us have experienced it, and many people have built traps just for such a purpose. Let me explain the "404 hell" concept to those of you who may not have seen or heard of this before.
The idea of "404 hell" is to trap lost surfers in a maze of links to sponsors, and consoles for when they try and close the window or back out with their browsers "BACK" button. The thinking here is, if they are lost or nosing around on my domain, looking for free stuff, then it's my job to get them to a sponsor, or simply off of my domain to keep them from burning more of my bandwidth. Most 404 traps will do this fairly well.
For starters, I'll give you an example of a typical 404 hell, and then I'll get into some detail as to why you may decide to use a different method.
The typical 404 trap should probably start with a very general page with links to many different niches. All links leading to a sponsor. Be careful not to offer too many choices, but be sure to offer enough variety to appeal to most anyone. The thing to remember here is that you're dealing with either a lost surfer (someone who clicks a link to a page that does not exist) or a nosey surfer (someone who sees a gallery4.html page, and types in gallery5.html to see if there is indeed a gallery5 page). Be sure and include an exit console to another page, so you can offer the surfer something different if they decide not to click on any of your links.
Now, this is where it gets a little tricky. What you decide to do should be determined entirely upon your own personal experience and situation. For me personally, I use a variety of 404 traps, each with their own purpose and value. One simply dumps traffic into my filter, while another pushes traffic into more of a trap, which offers one full page add after another, with links to all the sites a single sponsor has to offer. For example, the surfer may land on a page with only links to ARS sites, but if they close the window, they are hit with another page that has links to all the sites that MaxCash has to offer. If they close that page, they are hit with a page listing all the sites that Fetish Cash has to offer. If they close that page, they see one with all the PornMegaBucks sites. Each page offers something different, each page has an exit console, and if they close them all out (I forget exactly how many I have in line) they get hit with the starting page again. All pages are text only (to load fast), with mouseovers to hide sponsor codes, and they lead the surfer in a circle. The only way out is to click a link and go to my sponsor site, or to close their browser. This is where the "hell" portion of the "404 hell" comes from. Getting out of these traps can sometimes be "hell".
There are as many different methods for making use of this traffic, as there are people in the world. Some people start with a per sign-up sponsor, then offer a recurring sponsor on the second page, then maybe have the 3rd page with only links to pay-per-click sponsors, and then yet another with email program sponsors, or maybe a dialer program. I think the key here is variety. Keep offering the surfer something they haven't seen yet, and you're more likely to get that click. Another option is to make the last page of your trap one that lists several topsites, so you have a chance to exchange this non-buying, non-clicking traffic with some of higher quality.
A few things to remember about 404 traffic. Most importantly, you don't always know where it's coming from. It could be a smart surfer looking for more free stuff, or it may be a Link List owner trying to review a site you submitted with the wrong url. You should be eager to bounce around the experienced surfer looking for free stuff, but you don't want to put the Link List owner through the same paces, so moderation and preparation is important.
If you own domains that you know will never be submitted to other sites, then you can go full force on that 404 trap, however, if you're building 100 free sites on the same domain, you'll probably want to be a little less aggressive in your trap to keep from ruining your reputation due to a simple mistake.
Traffic flow. It's all about the traffic flow. Knowing where the surfer came from (even if this knowledge is the NOT knowing of where they came from) and making sure they have a chance to get where they (think they) wanted to go.
A link list or TGP owner may prefer to simply point their 404 at their main page to keep all the surfers (lost or otherwise) on their traffic site, or the owner of dick-pics.com (me :) may choose to have the 404 point to a gay, shemale or "for women" sponsor. Again, it's all about where the surfer was, and where you want them to go.
You may decide a "404 hell" trap is not for you. Whatever your decision, be sure and use this traffic wisely.
- Freak