Search arbitrage is most commonly seen in PPC advertising. A site will buy search ads and send the unsuspecting searcher to another page full of ads. The arbitrager is paid when searchers click out on yet another ad. The arbitrager pockets the difference between what they paid per click and what they get paid per click.

Now, of course, being a successful search arbitrager is a little more complicated than that, and Geddes illustrates that. Where things are particularly complicated, though, is in how different marketers feel about the practice. Geddes also points out some of the ways that advertisers can benefit from arbitragers' efforts, and these include traffic from both ad positions they don't control and the long tail of keywords that the advertiser might have never realized were relevant.

Where Geddes really into depth, though, is in illustrating the different reason why marketers are so deeply upset by search arbitrage. The first argument he explores has to do with user experience, and goes as thus:

The search experience is about finding answers. If a searcher is taken from a search result to a set of ads without any meaningful content, then they really didn't find any answers. [...] Following the logic of these arguments, if the page full of ads wasn't in the middle between the search result and the advertiser’s page, the searcher would have found the information one click sooner and had a better experience.

At first glance, this seems to make sense. Intuitively, we think that users will click away when they hit the arbitrage page, but that might not make that much sense. First of all, to click on the ad on the arbitrage page means that it'll take two clicks to get to where the user is going. To click the back button and on another search result, however, will take three, so most users will probably just click on through from the arbitrage page anyway.

You might still argue about how the user's experiene would be more streamlined if search arbitrage was outlawed, and that people trust google results and don't like straying more than one click away from them, and that's a good point. But at the end of the day, you have users who click on ads, and users who don't. I'm part of the latter group. I will never click on anything that isn't an organic listing. If you're into clicking on ads, though, you'll have no problem clikcing on the more targetted ads on the search arbitrage site. Therefore, the user's experience is uneffected, and possibly improved.

Of course, the arguments against search arbitrage don't stop there. As Geddes explains:

One way of being profitable with arbitrage is to buy inexpensive words and send them to a page of similar, yet more expensive words. Thus, the second argument against arbitrage resolves around ad relevancy. When a page shows ads for a different keyword than the one just searched, combined with the fact the advertiser is being charged for the more expensive keyword from the arbitrage page, not the cheaper keyword that occurred on the search page, there's a sense of being cheated.

This argument is so stubbornly stupid, I'm not sure where to begin. Not all users search the keywords you bid on. In fact, many users search broader, hoping to return search results that offer them the widest possible selection. By bidding on the less valuable keywords, a search arbitrager is taking a risk on a keyword that either you wouldn't, or were too myopic to think of doing.

Say a user queries for "pitbulls" and then clicks on an ad that brings them to an arbitager's site. When they get there, there are ads for featuring the more expensive keyword "pure bred pitbulls." If the user is just looking for information like bite pressure, they'll either click on a different ad or leave. Either way, it didn't cost the advertiser a cent. As for the user's experience, the advertiser doesn't really care about that user anyway. If they click through from the arbtrager's site, however, they're likely a potential client. Geddes potrays the advertiser as pleading:

Should an advertiser be charged for a "personal injury lawyer" click when the search was just for "lawyer?" Why should a company be able to buy an ad about one keyword and send traffic to ads about an entirely different keyword?

Well, the answer is yes. The advertiser just saw a conversion that they didn't have had stomach or budget to reach by bidding on a broader, more risky keyword. The arbitrager did, however, and deserve their cut. Of course, advertisers opposed to search arbitrage doesn't stop there. As Geddes explains:

The last argument against arbitrage is about the proverbial "middleman" taking his cut. [...] They feel these arbitragers are stealing money from their search budgets. These advertisers often have ethical reasons for not wanting to see arbitrage proliferate no matter what the actual ROI may be. They often have other arguments regarding relevancy and search experience; however, no type of positive performance will ever matter. They feel they are being cheated, and they don't want to put money in a thief’s wallet.

Well, this is like taking the two arguments I just refuted, putting them in the blender and adding a pint of water. All they're saying is that feelthey are being cheated. Well boo hoo hoo. They're just bitter because someone has found a way to leverage PPC to make money without doing as much work as they have. Does that make search arbitrage noble? Not really, but it doesn't make it unethical either.

At the end fo the day, search arbitrage works because there is room in the marketplace for it. If you want to complain about middle-men, first ask yourself what you are. Do you write the songs and record the CDs yourself, or do you just take in orders and EDI them to a supplier, who got them form a label who recorded them? Do you build social networks from scratch, writing all the code yourself, or do you simply help clients use what's already there in the most efficacious manner possible?

Sure, search arbitrage is often a bothersome reminder of how others can monetize our hard work, but that doesn't mean that they're taking that money out of our pockets. You might not like it, but that doesn't mean that it's wrong.