Google & Yahoo! Kill PPC Arbitrage

Feb 14th

Google has been getting tighter with their control of their ads, fighting arbitrage with the following changes

  • manual reviews, smart pricing discounting (of publisher clicks), and quality scores (increasing the cost of advertising junk)
  • improved duplicate content detection
  • decreasing the clickable area in many AdSense ad units
  • killing sub-syndication of their feed with companies like Ask
  • keeping a greater percentage of ad revenue from each click
  • requiring advertiser display URLs to match ad destination (starting April 1st)

From this graph you can see the sharp rise of click arbitrage quickly fell off when Google decided to work on fixing the problem.

Yahoo! has turned a blind eye to arbitrage for years. Some people who had strong feeds only saw their arbitrage profit margins increase as the weaker players could no longer compete arbitraging Google traffic. And then Yahoo! dropped a bomb, announcing that arbitrage to their ad feeds is now against their TOS and Parked.com confirmed it.

The biggest distributed ad networks do not want to buy any traffic that is bought directly via similar networks. These companies are cutting their short term revenues in an attempt to make their ad ecosystem healthier. On multiple occasions I have logged into Yahoo! Search Marketing to see a random multi-hundred dollar spend on a keyword that typically costs under $1 a day. I, for one, am glad to see this crap die. But it died a few years too late.

Google and Yahoo want a direct relationship with publishers and merchants. They hate virtually any type of affiliate that is not a highbrow relationship. More power to the organic players, and please static text links instead!

Published: February 14, 2008

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Comments

February 14, 2008 - 1:41am

I think arbitrage just ruins the internet, and the less arbitrage sites exist, the better it gets.

February 14, 2008 - 7:05am

Arbitrage in general means fixing a problem (a unbalanced state) in a marketplace. If one shop sells your favorite candy bar for $5, but you can easily buy that candy bar for $2 some other place, you may consider selling that bar for about $4-$4.50 right next to the expensive shop. This is arbitrage.

Some for the internet. Affiliate companies should compete on AdSenese and outbid any arbitrage site. They could do that easily, because they keep the aff. commission for themselfs. If they don't do that, it means the aff. company does not function the best optimal way. Aff. arbitrage sites just fix that problem while making money :)

February 14, 2008 - 7:27am

When I was 16 I sold baseball cards...largely by organizing a mess, setting a flat rate well above the cost of my time and product, and arbitraging the gap between customer demand and sloppy organization of competing outfits.

But online the arbitrage gap is often much smaller, less labor intensive, and in many times without value to the merchant.

Some of my best affiliate campaigns simply arbitrage the brand of the company offering the program. In most of those cases, those companies would have fatter profit margins if I was not in the picture.

Do they pay me? Yes. Should they? Probably not.

Worse yet, many affiliates not only add zero value, but some go so far as trying to damage your brand just so they can make a dollar.

When some of the marketplace "fixes" have you pay someone to destroy your brand then they are no longer "fixes."

February 14, 2008 - 12:13pm

The other type of arbitrage that comes to mind is an affiliate who bids on thousands of keywords and direct links to the merchant.

This case is similar to brand bidding, but I would argue is beneficial to the merchant, because it picks up the slack in their inefficiency by bidding on positive ROI keywords.

February 14, 2008 - 6:39pm

True...but many affiliates do not do this. Most of my affiliates that use PPC, for example, bid on stuff like aaron wall, seobook, seo book, seobook.com, etc.

The affiliates that own a trusted channel outside of search add a lot of value. Other than clogging up the SERPs with more information about me and blocking competitors I am not sure how much value it adds for the search results to contain yet more ads selling my stuff.

The flip side of this coin is that one of my friends did exactly what you said, adding lots of value by going outside the brand they were marketing to other terms that converted well. He got up to about $1,000 a day of profit (over $300,000 in part of a year), then his merchant stole his ad copy and keywords. Tools like keycompete, spyfu and compete.com make it easy to get some glimpse of the competition, and many affiliate programs also have ways to track history. Since the merchant is paying themselves of course they can afford to outbid the affiliate if they clone all the advantages that the affiliate once enjoyed.

The only types of affiliate marketing that have lower risk are:

  • when an affiliate has so much authority that they have their own direct traffic stream and lots of trust built up (like CopyBlogger or Problogger).
  • when authoritative domains that rank well in the search results have clean traffic that the merchant can not rank for and can not duplicate
February 14, 2008 - 1:34pm

Found that you usually get what you work for.

- the amount of work in arbitrage is minimal, thus the income is minimal.

the less arbitrage sites exist, the better it gets.

now thats a little too bold of statement.

February 14, 2008 - 2:12pm

As a heavy duty G and Y advertiser I am happy to see this guy. It will be easier to grab the same cheap clicks these guys were getting and instead of sending them to a garbage ads page, they are sent to a product page. Arbitrage in the real world can lead to a more competitive marketplace. In the example given by huSEO we are talking about someone selling real goods, not just getting eyeballs and telling them to go somewhere else. It's not difficult to develop your own product and then use your mad arbitrage skills to drive cheap clicks to the final product. And it pays off much better. And lasts longer. Hopefully this crack down on the standard messy arbitrage sites will lead to more of these people actually bringing something of value to the internet, instead of trying to be middlemen of middlemen for the middleman.

February 14, 2008 - 6:41pm

Preach on. :)

February 14, 2008 - 4:26pm

So is there any room left for Google Cash arbitrage? Can you still make a livable income off of it?

February 14, 2008 - 6:40pm

Here is one way of looking at that. I have one thing that works really really well, but as soon as another affilate discovers it my margins are likely cut in half or worse.

February 16, 2008 - 11:41am

It all sounds great if a crackdown has benefits for real content publishers - and I mean financial ones here! Perhaps if the advertisers didn't waste so many cents on near worthless clicks, more of their budgets could be directed towards me.

But I can't help feeling that G(od) taketh away with one hand but probably won't giveth with the other.

February 16, 2008 - 12:07pm

I don't think publishers will see a short term rise...mostly just the junk is falling out and they are hoping that as advertisers cut budget and they cut junk inventory hopefully they will end up keeping stuff about the same or so, but AdSense earnings have dropped about 30% for a number of publishers I know...over the course of the last 3 or 4 months.

February 18, 2008 - 2:49am

I am less concerned about legitimate arbitrage traffic...at least that is real users, which can lead to real conversions.

I think Yahoo! needs to worry about all their bogus traffic that comes from robots/click farms/bots. I wonder how this will affect the traffic that we are currently buying from them.

There was one site (or network of sites, all coming from one main feed), that would send us 3x the traffic of yahoo.com, and we would have to jump through hoops to even get a slight refund. It would not fall under arbitrage traffic, but it was surely garbage traffic. I still think their main problem is not letting the advertisers opt out of "search partners" and buy yahoo.com only traffic. I would buy that traffic all day long.

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