Search Arbitrage Issues

Aug 8, 2006 • 2:43 pm | comments (4) by twitter Google+ | Filed Under Search Engine Strategies 2006 San Jose
 

Jeffrey Rohrs is moderating this session, this is the first ever of this session. This is a huge panel, hope they don't all talk too long. :) Well, that answers that, only two or so have presentations, then there will be an open discussion. On the panel are Jake Baillie, Frank Watson, Tim Daly, David Szetela, Kristopher B. Jones from Pepper Jam, and Kim Malone of Google.

Jake Baillie from True Local was up first. You have selected the most important session at this conference, he says. People have been writing about this since 2002 but no one seems to care. Who are you? PPC marketer, AdSense publisher, 2nd rate search engines, professional arbitrageur, first-rate search engine and your clueless. What is arbitrage? The practice of taking advantage of a state of imbalance between two or more markets (its an old school concept). He explains it with selling and buying "angry bananas," he shows you how it works between Yahoo PPC and Google PPC. 1998 is when he seen it started off on the affiliate space. 2000 an article was published on ClickZ on this. June 2003 Google launched AdSense. November 2003 Kevin Lee stipulates that Google won't be affiliate arbitrage friendly in the future. Jan 2005 Google becomes unfriendly to affiliate arbitrage. April 2006 click arbitrage awareness at all time high. July 2006 Google becomes unfriendly to click arbitrage. Why engage in arbitrage? Because we like to make money; bootstrapping new sites, out of stock inventory and inflating Alexa traffic rankings. Who are the arbitrageurs? Yahoo Shopping, CNet, Shopping.com, Verizon, Info.com, PriceGrabber, NextTag, eBay, etc. arbitrage isn't just for MFA sites. Real businesses are using arbitrage as part of their "real" business model. Arbitrage is not a "shhh..." word. It will continue to grow... It will make the space more competitive. Search engines will attempt to grow revenue from arbitrage. It's not set and forget when it comes to traffic quality. He hates the word/term MFAs (Made for AdSense) sites, these sites are like every other site, he explains, that they are out there to make money. He explains that those that need to make higher margins, the arbitrageurs will stamp them out who are happy to make even 5% margins. Good examples of arbitrage: A Google search for 650 Treo and shows a BizRate landing page and ad, the landing page has AdSense on the bottom of the page. He then shows Verizon Super Pages, using Yahoo PFI which costs about 9 cents per click, the landing page has ads on them. MSN search for "sweaty feet" and shows a ShopBirght ad and landing page. Arbitrage 101; source to purchase traffic (AdWords/YSM), buyer for that traffic (AdSense/YPN/3rd Tier engines), some brains, a calculator, web site, and the simple magic formula. The formula; (outgoing ppc * revshare * CTR) - source PPC = profit.

Kim Malone from Google is next up. She of course talks about Google's goal, blah. Buying low and selling high is good business, as long as the user has a good experience. Misleading the user will pollute that ecosystem, one example she gave was an ad for a carbon monoxide detector that lands to more ads - she explains they (Google) is working against this. Causing extra clicks drives users away, clicks from one ad to an other ad to and other ad and so on - the none stop ad to ad to ad to click. Ensure the useful index through advanced algorithms, and that there are human evaluations. Ensure there is a useful publisher network with automated signals and human evaluators without subjectivity. Ensure there are useful ads through ad serving technology and landing page quality. She then goes through some tips to improve quality ads, all basic stuff.

Frank Watson is asked why does arbitrage push his buttons? He said the main thing is that the constant circular rotation. With some keywords, there are hundreds of arbitrageurs on one keyword phrase. It can be a nightmare. The Google change via Google AdWords Landing page helped recently. They have to get rid of the ability of search partners to give search pages. Legitimately the whole affiliate marketing is OK. But what is destroying search is the landing at constant other search pages. All those people in the space automatically rise the price up.

Tim Daly adds that Jake took the angry banana from point A to point B. But the advertisers in AdWords who sell the ultimate product is not asking you to go from point A to point C, D, E, F and then B to get the product. So where does it cross the line. He reads a line from Yahoo!'s TOS saying advertisers do not have to pay for fraudulent clicks, i.e. people saying they are selling $29 for a product but they don't. Do advertisers have to pay for it? He then puts Jake's True Local site on the spot for motorcycle parts keyword phrase on page 4, which brings up a TrueLocal arbitrage page.

So now Jake has to defend himself. He shows that that page asks you to type in a zip code, and then it will show you local ads based on the keyword and zip code.

Tim then adds you do not sell these things and its fraud to word the ads that you sell them.

So Jake then goes to Kim from Google to ask them.

Kim adds that Google tries not to make subjective judgments. Google's goal is to get the user what they want from the first click and not the second click, wording doesn't matter.

Kristopher says he wants to draw the line in the sand between... He shows an example of Panasonic TV search on Google and a shopping.com result PPC. You see ads and not the product. It is about the value they provide.

Ok, I am out of here...

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Comments:

dude999

08/08/2006 08:34 pm

I learned some interesting stuff about Google from that, thanks.

Michael

08/09/2006 11:08 am

Best article I read in months. Thank You! I have one comment on the A to C to B topic. If the search is somewhat general there may be multiple products that fit the bill. A page that displays reviews of multiple products that would be purchased on other websites. This example would fit into that category, yet provide a high value to the end user. IMHO there is no blanket statement or algorithm that can identify poor landing pages. Michael

Jason G. Williscroft

03/30/2007 09:52 pm

OK, funny! I wish I'd been there for this one. My company operates in the intersection between the Search & Affiliate spaces, and one of the fears we constantly have to address with our clients is that affiliate attempts at arbitrage will damage their own Sponsored Search efforts. Frankly, we think they should EMBRACE the arbitrageurs, and I think we have <a href="http://profitrank.com/Resources/Articles/tabid/136/articleType/ArticleView/articleId/141/Affiliate-Arbitrage-Naughty-or-Nice.aspx" rel="nofollow">a strong economic argument</a> to support that point of view. Beyond simply tolerating the practice, our advice to our clients is to encourage affiliate arbitrage actively and to support it in any way they can.

Ryan P

11/09/2009 06:25 am

Just curious what these people in arbitrage use... For example when they run these google ads to yahoo ads and make money off of the yahoo ads... how do they get access to display these yahoo ads? Its not the yahoo publisher network is it??

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