PPC and Search Arbitrage

Hail to the advertisers

To understand both the appeal and the risks of search arbitrage, one must first examine PPC marketing from the advertiser’s perspective. Advertisers are the bread and butter of this system, the fuel, the driving force. They pay the PPC search engine for targeted web traffic only – the PPC search engine in turn provides a commission for Affiliates who can produce this targeted traffic. Any attempt to circumvent this process, either deliberately or through ignorance of the system, will be extremely consequential.

The advertiser’s ultimate aim is the same as the Affiliate’s – to earn revenue. Whereas the Affiliate earns by driving traffic to the advertiser’s website, the advertiser earns by converting this traffic into sales. The reason why advertisers bid so heavily on keywords is to attract the targeted web traffic they want to meet an expected ROI. The Affiliate’s role is to provide that targeted traffic through means of legitimate search engine marketing.

Why search engine marketing is different

Search engine marketing is inherently different than other forms of online marketing. For one, the conversion rates and the advertiser’s expected ROI are much higher. This is why keywords on PPC search results earn such high bids. The two-click process, where a user inputs a query, clicks the search button and then clicks on a result, yields better converting, higher-quality traffic.

A good conversion rate with a two-click search engine marketing model is about 2%, which means about 1 in 50 users who visit the advertiser’s page via sponsored search results will make a purchase. Conversely, in a one-click model (think banner ads and AdSense-style boxes on content sites), the average conversion rate is much lower, ranging from 0.5% to 1%.

The appeal of a two-click, search engine marketing model is twofold – advertisers pay more for quality traffic that converts at high rates, and Affiliates earn more for providing said quality traffic. The sanctity of this system lies in the operative term “quality“– it is inviolate, a mutual accord made amongst the Affiliate, the PPC search engine and the advertiser. Quality traffic consists solely of internet users who are clicking on sponsored search results with the eventual intent to purchase or subscribe to the product or service they have searched for. This, and only this, is the type of traffic advertisers and reputable PPC search engines will accept. Remember, the advertisers aren’t just paying for their traffic, they’re investing in it. Their goal is to see a return, one that falls within their expected bracket. An average advertiser investing in a two-click search engine marketing model expects to see a return of 130% to 150%. This means that for every $1000 they pay for traffic, the expected sales return is anywhere between $1300-$1500. Therefore, when we say “good quality” traffic, this is what we’re referring to.

Search arbitrage is a method used by Affiliates to procure this quality traffic. Given the standard ROI an advertiser can reasonably expect, the onus is on the Affiliates to inform themselves of the potential and probable pitfalls they may encounter when engaging in this system. Let’s considering also the profusion of illegitimate traffic sources online. It is estimated that anywhere from 15% to 70% of all PPC traffic sent to advertisers is fraudulent. 15% to 70%! Obviously, the range depends on the particular search engine, the technology they use to protect the advertiser and the type of traffic they cultivate. It is the responsibility of the Affiliate to ensure that they work only with reputable PPC search engines who demand nothing but high quality traffic. Of course, saying it is one thing – following through is quite another.

Search Arbitrage Advantages

There are two main benefits that make arbitrage an attractive marketing model. However, while these two points are compelling, neither of them is without flaw or fault.

Targeted traffic

Search Arbitrage allegedly elicits the kind of traffic advertisers want – search engine traffic. The reason PPC marketing is such a success is that it brings targeted web traffic to the advertiser – exactly what arbitragers say they do. They bid on keywords, appear in a search results list, and direct the user to another search results list containing relevant ads. Since the end-user is willfully and deliberately performing a search, they will be interested in the ads the Affiliate directs them to. The arbitrage pundits argue that the integrity of the search process is maintained, albeit slightly lengthened.

Longer reach

The advertiser is also benefited by having their ad appear on multiple positions in multiple listings. A PPC search engine is only as good as its reach – the more end-users who perform searches, the stronger the search engine will be and the more attractive it becomes to advertisers. What search arbitrage can do is widen the breadth of the advertisers’ potential reach. It lists the advertiser’s ads (however indirectly) in the results page of multiple search engines, and in different hierarchal positions. In this way, the Affiliate can provide the advertiser with traffic sources and potential customers they wouldn’t necessarily have otherwise.

Why, with these 2 strong advantages, is there so much opposition to search arbitrage? And why do so few Affiliates end up making a profit?

Search Arbitrage Disadvantages

Most advertisers and PPC affiliate programs are downright suspicious, if not completely adverse to search arbitrage. At best, they see it as marketing activity no better than spam, and at worst, a tool for inexperienced Affiliates to generate invalid traffic and alienate advertisers. Very few able, skilled Affiliates produce a positive user experience and quality traffic, while most Affiliates neglect to do the necessary work involved and end up losing much time and effort, not to mention good standing with advertisers and PPC affiliate programs.

We mentioned 2 advantages of search arbitrage – that it elicits search engine traffic and widens the reach of advertisers. True enough, when the proper measures are taken and when the process is fully understood.

Not-so targeted traffic

Affiliates who bid on keywords are not in fact purchasing search traffic. Rather, they’re simply securing placement on a search results list. What’s the difference? Anyone can access a search results list, whether it be a bot or an incentivized user. There is a wide gulf between good traffic, which is a bona-fide human end-user who is deliberately making a search because they eventually plan to perform an action, and bad traffic, which is anything else. Assuming that securing placement on a search results list is tantamount to receiving high-quality traffic is wrong. Bots and incentivized techniques are quite sophisticated, and search results lists are fodder for them. High-quality search engine traffic is a much sought-after commodity specifically because it’s such a difficult thing to procure and to maintain. It is the responsibility of the Affiliate to ensure the traffic they redirect to the advertisers is clean – anything else will result in an unequivocal banning.

Question the source

As for the advertiser being rewarded with multiple listings and multiple positions, the same problem arises. Not all PPC search engines police their listings equally, and some (either deliberately or not) allow bad traffic to frequent their results. Just because an arbitrager can get wider distribution by bidding on keywords with multiple engines doesn’t guarantee acceptable traffic – in fact, the opposite is usually true. PPC search engines with low bids and few advertisers often deal with incentivized or bot traffic. While the high resale value of a keyword might seem inordinately tempting, there is doubtless a reason why the keyword bids are so low. As general rule of thumb, low bids = questionable traffic.

Mismatched keywords

Affiliates also attempt to circumvent the issue of bid prices by bidding on keywords that don’t match the ads they eventually show the end-user. An Affiliate bidding on the relatively cheap keyword “sex” who directs the user to a results page for the more expensive keyword “car” might generate un-incentivized human traffic, but definitely won’t bring the advertiser targeted traffic. When the advertisers see that this traffic isn’t converting, they’ll issue a ban. And when the users see they’re being brought to a page completely unrelated to what they were searching for, they might even complain to the PPC search engine.

The whole idea of successful search arbitrage is to generate true human search engine traffic that is targeted towards the advertisers’ product or services. Variations in keywords will not produce this traffic, and advertisers will not accept it. There must exist a direct relation between the keywords the Affiliate is bidding on and the keywords that generate the paid search results list the user is directed to. Affiliates must mention the latter keywords in the title or description of their ad so that the user knows exactly what they’re going to see. Relevancy is the key issue here. Affiliates who bid on the keywords “used cars” and direct the user to a search results page for the keyword “cars” are not showing relevant results, and will not produce targeted traffic. Affiliates who bid on the keywords “auto” and then direct the user to a results page for the keyword “cars” are in the clear, so long as they mention the word “car” in the title or description of the ad.

If you’re not sure if the keywords are closely related, do a trial search. Go to the PPC search engine directly and perform a search for the respective keywords. Compare the results. Use your common sense. If you want to be a successful arbitrager, show the users what they’re searching for. You’ll produce quality clicks the advertisers want, you’ll enrich your users search experience and you’ll create a sustainable model that is much more likely to see you making a profit.

Search after search after search….

Arbitrage adds another link in the search chain. The best search engines are praised for the comprehensiveness and relevancy of their results. Inflating a search engine’s listing by artificially populating it with results that redirect the user to another set of results lengthens the search process by one click and arguably creates a negative user experience. If there’s one universal truth about any internet user, it’s that they want meaningful content quickly and with as little effort as possible. Unnecessarily prolonging their access to content is definitely less fun for them.

Now as an arbitrager, there isn’t much one can do to avoid this nuisance aside from taking preventative measures that will mitigate the extended search process. Eliminating pop-ups or anything else that interferes with the search process is helpful, as is showing users only the relevant results they’re looking for. However, major detractors of search arbitrage argue that the users should always come first. Since no user wants to unnecessarily lengthen their search, pundits state that organic sources of traffic will always be more attractive and, in the long-run, more profitable for the Affiliate and advertiser.

Keyword fluctuations

Keyword bids can change on a dime based on a number of different factors. Geography, seasonal influences, user habits, etc. can affect an advertiser’s bid. If Affiliates don’t monitor these fluctuations closely, they can find themselves losing money very quickly. Working with only a few keywords, this is feasible. Affiliates can check in however often they like and ensure that the keywords they’re bidding on are still profitable. However, when dealing with many keywords in many different categories, this can sometimes get overwhelming.

How Affiliates can Succeed

So now the big question: what can the Affiliate do to make a profit with search arbitrage?

Below we have outlined 6 major areas to consider. While perfect adherence to these steps does not guarantee the would-be arbitrager will be a success, it can be safely said that ignorance of them will land any Affiliate in hot water with the advertiser.

Get close to the advertiser

In this case, the advertiser is the PPC provider who distributes the advertising feed. Before registering with them, see if they have a specific policy about search arbitrage. While direct contact is good, it’s always best to browse through a PPC provider’s own published material and read up on them first. Read over their website, especially their Terms of Services and FAQ so that when you do contact an associate, you’re as well-informed as possible. Not all PPC providers are created equally. Niche or vertical PPC search engines might have better keyword bids for a particular category than general search engines.

This being the enlightened age of Web 2.0, companies are voraciously using social media tools to communicate with their clients (and who would be better users than an online search marketing company?). Blogs, social network accounts, videos – all major and minor online businesses want to be seen as Web 2.0 savvy, so take advantage of their progressive web presence. Some PPC providers might even have an arbitrage-only feed – a specially configured list of search results designed to work with search arbitrage-generated traffic. And in the event that the PPC provider doesn’t allow search arbitrage traffic, the Affiliate will save themselves a lot of wasted time, effort and money by doing the legwork first.

Don’t try and cheat the advertiser by sending them arbitrage traffic without warning. Any decent PPC provider can identify this traffic immediately, and will not hesitate to issue a chargeback if the Affiliate is in violation of their Terms of Services. Pleading ignorance or good intentions won’t work either. Remember: it’s the advertiser who’s paying for everything. Everything. Their budget is not infinite, and their goal in this whole enterprise is to make money. If they’ve banned a particular traffic source, don’t use it. If they don’t accept a certain type of traffic, don’t send it. If you can make them money while playing by the rules, kudos. If not, get ready for some sleepless nights. It’s practically impossible to be re-instated once an advertiser or PPC provider bans you, so make sure you get it right the first time by doing as much as you can to avoid sending invalid traffic.

Research the traffic source

In this case, the traffic source is the PPC search engine where Affiliates are bidding on keywords to obtain traffic they will re-direct to the PPC provider’s search result listings. The importance of proper research done on any PPC search engine before paying for their traffic cannot be stressed enough. Find out everything and anything you can on them – where there traffic comes from, how many advertisers they have, what their average CPC is, how long they’ve been in business, how they guard against clickfraud and bad traffic. Looking at their own published materials won’t be enough. Check out forums and blogs to gauge their partners’ and advertisers’ reactions and reviews about their services. Be as comprehensive and thorough as you can. There is a wealth of material about any decent PPC search engine, and an investment of time spent researching them afford you a tenfold return. More often than not, if a PPC search engine is loathe to reveal their traffic sources or they’re secretive about their business, they’ll have questionable traffic sources. Most importantly, always buy “premium” traffic from the PPC, if a traffic quality choice is offered. Remember, you get what you pay for. Don’t be deceived by low prices, as the product will be very different.

Play around with their bidding system to gauge incoming traffic before you send it to the advertisers. Contact the PPC provider and tell them your plan – they might have a trial feed specifically for testing purposes, or can advise you of how best to proceed. Be prepared to lose a bit of money at first as you hunt around for the best converting and most profitable keywords. Search arbitrage is an investment, and not all investments pay off right away.

Try alternative sources

Paying for traffic from a PPC search engine is not an Affiliate’s only option. Think about it. Advertisers want targeted traffic, and targeted traffic is comprised of users who are actively searching for particular products or services with an eventual intent to purchase, subscribe or otherwise commit an action. While targeted traffic’s first home will always be the search box, why not investigate content sites? The traffic there will be connected to a bevy of keywords an entrepreneurial Affiliate can capitalize on. Invest in some banners or keyword links that would bring the Affiliate to relevant result pages. Of course, the operative term here is relevant. The traffic needs to be targeted for it to convert; otherwise both the user and the advertiser will reject you down the line. However, with proper diligence and effort, catering to content site users is entirely feasible.

Don’t send bad traffic

Despite the best preventative measures, a small amount of poor traffic might still seep through. Before any significant levels are sent to the advertisers, Affiliates should take all steps necessary to make sure the traffic is as clean as possible. This isn’t for amateurs. Sorting through traffic is a painstaking, exacting process that requires a higher-than-average level of online know-how. The preventative measures mentioned above are integral, but so is the ability to determine good traffic from bad. This type of skill separates amateurish Affiliates from the professionals.

Monitor your traffic constantly. At least once daily, you should be looking over your server logs to check your click stats. Making sure they’re consistent with your PPC provider’s stats is a good step too, but you should focus your examination on your user’s behavior. How many clicks came from the same IP? What was the time delay between clicks from the same IP? How many users used the search box on your search engine? How many users clicked on one or more of the related keyword links? How related were the keywords clicked or searched from the same IP? How many clicks were on the 1st position? All these factors and more should be taken into account when determining the quality of traffic. Bots and incentivized users behave very differently from bona fide searchers, and the sharp-eyed Affiliate should be able to catch and distinguish good traffic from bad. Of course, evaluating traffic isn’t enough - Affiliates must be able to disable and discontinue poor traffic sources immediately.

Examine your search to click ratio. Obviously, not every user that clicks on the ad you’ve paid for will click on the sponsored search results you direct them to. As a rule of thumb, if you have fewer than 1 in 5 users clicking on the sponsored search results, that traffic is bad. The same goes if more than 4 out 5 users are clicking on the results. Anything between 20% and 80% requires testing, but anything outside that range is almost certainly fraudulent traffic.

Listen to your PPC provider. If they’re telling you a particular source is bad, it’s bad. If they announce that a particular PPC search engine’s traffic is no good, then it’s no good. Most PPC providers will allow you to identify all incoming sources of traffic (SearchAnyway offers subaff IDs, for example) so that each of their resulting clicks can be analyzed, tested and rejected when necessary. Use the tools provided to become a better Affiliate and a more successful arbitrager.

Invest in clickfraud software. There are numerous options available online that examine a variety of click metrics and parameters, and will help filter your traffic (in varying degrees of success). While some are clearly scams looking to part a naïve buyer from his money quickly and cleanly, others aren’t too bad.

Consider not using Search Arbitrage

Traffic purchased from one PPC search engine and sold to another is a tricky business to manage. Those who are successful with search arbitrage are highly successful, seeing amazing profits and a great ROI. The majority of arbitragers, however, struggle to see their investments payout and are at a loss to explain their misfortune.

Most Affiliates enter into search arbitrage with the notion that it’s an easy system to master. But easier than what? Easier than obtaining and sustaining organic traffic? While it’s true that getting a high ranking on a popular search engine’s organic list is difficult, if not downright mysterious, the inherent benefits of being there are immense. The traffic is generally cleaner, of higher quality, and therefore better accepted by the advertiser. It’s easier for the Affiliate to police as well, and to eliminate poor sources quickly. Organic traffic is the best money-maker in PPC marketing, and nothing since can or is expected to usurp its title.

The processes of a search engine’s algorithm that seeks, sifts, determines and finally ranks web sites based on relevancy to a query are somewhat known to webmasters – incoming links, number of visits, the PR of the page, the age of the site, etc. – so that manipulating these criteria is achievable, if labor intensive.

And that’s the rub. Organic traffic is perceived has being hard to obtain, whereas search arbitrage is perceived as a relatively simple model. Securing organic traffic does require a prodigious effort, but that traffic is often much higher in quality than anything found via arbitrage. Users tend to trust organic listings more than sponsored listings – when given a choice, most opt for the former. There is an inherent credibility to a site when it appears on the first page of results; moreover, bots and incentivized users tend to ignore organic results.

In terms of quality, conversion, and overall desirability, any advertiser will pick organic traffic over arbitrage-generated traffic hands-down. There is a world of difference between being a successful Affiliate and a successful arbitrager – decide which one you’d rather be.

Conclusion

Nothing worth having comes easy.

When done correctly by an informed, dedicated Affiliate, search arbitrage can work. It can generate sales for the advertiser and revenue for webmasters with little or no fuss from either side. However, its proper execution requires much effort and education, as well as a significant investment of time and money from the Affiliate. Some advertisers love it, others won’t touch it. It’s the responsibility of the Affiliate to do all that is necessary to ensure that the traffic they generate, by whatever means, is of high-quality – that is, is nothing but targeted, human traffic with a genuine intent to search for and eventually purchase, subscribe or otherwise commit an action. Anything else will be immediately dismissed by the advertiser.

Any Affiliate can easily earn $10,000 a month with search arbitrage, or more. If the proper time is given and the required effort and research are made, there is no reason why you can’t be a success. Take your time, find quality traffic sources, and become part of the online marketing revolution.