Arbitrage is defined by Wikipedia as "the practice of taking advantage of a state of imbalance between two or more markets." When related to Internet Marketing, specifically paid search and contextual advertising, this practice has become known as "AdSense arbitrage" since this was probably the first widely used platform. Essentially, people make money by bidding on less expensive terms to drive people to a page with AdSense or some other Publisher Network ads. When people click on those ads, the money that the site owner makes for the click exceeds the money that he spent to drive the traffic to the site. With a good enough "conversion rate," this can be very lucrative. Note that we spoke about this in April when covering a SEW thread.
A more recent thread at WebMasterWorld brings up the subject of AdSense arbitrage in a slightly different manner, but leads to many similar points about the ability to make money using this process. One member states:
Arbitrage works best when you can take advantage of the differences in cost/return on 2 different networks.And another ads:
Whenever I have used AdWords my AdSense earnings have averaged 25-30% of the advertising investment however I use AdWords to introduce new product lines or a new site.
It is speculated that Google and Yahoo are trying to do something about this. One would have to wonder how long that may take, however, since it makes the portals money even though it may muddle some search results. See the thread at WebMasterWorld Forums. The other very long and entertaining thread you may remember is at Search Engine Watch Forums.
