Manage Subscriptions · Subscribe Now · F.A.Q.'s
HOME · Friday, May 16, 2008
Accounting, Management & Legal
Crash Course on Pay-Per-Click Arbitrage
What is it, and how does it impact your ecommerce business?
By: Boris Mordkovich
Comments: 8
If you've spent any time on pay-per-click (PPC) forums or in the blogosphere, you've probably heard about PPC arbitrage — the ill-reputed practice that drives bid prices up and makes life more difficult for advertisers. So, what exactly is it, and how can it affect you as an advertiser?
In a nutshell, pay-per-click arbitrage is the practice of bidding on low-cost keywords, purchasing clicks from Google, Yahoo! and other search engines and then redirecting the visitors to dummy, one-page websites created solely for the purpose of hosting expensive AdSense ads.
The arbitrageur makes money because he/she buys the first click at a cost much lower than the fee received as an affiliate when visitors click on the dummy site's ads. Enough clicks through the affiliate ad and the arbitrageur collects plenty of money to offset the cost of the initial PPC ad.
Still, why is this even an issue for discussion when it could be argued that someone is simply taking advantage of market inefficiencies?
There are two major problems with this practice of PPC arbitrage.
First, it senselessly inflates click prices for legitimate advertisers. By adding an extra step to the process, it generates unnecessary clicks and higher bid prices for everybody else.
Secondly, and more important in the long run, PPC arbitrage has a highly negative effect on the user experience. Since arbitrage sites provide virtually nothing of value to users, arbitrageurs have to trick people into visiting and using the site. These dummy sites generally confuse users and coerce them into clicking more ads. This has the potential to scare a prospect away or just ruin the user's confidence in the quality of the search results.
Taking a look at the whole picture, it's bad for the advertiser, bad for the user, and bad for the search engine. In mid-2006 Google promised changes in algorithms to help deal with PPC arbitrage. Diatribes on quality content — or lack thereof — at Google, Yahoo!, MSN and other search engines are common. The effect so far has been less than optimal, but at least the problem has been acknowledged and efforts have begun to limit its spread.
As competition increases, search engines will need to find better ways to combat PPC arbitrage if they hope to compete more effectively for advertiser dollars and user visits. What can you do? If you want to fight the problem, and you've come across a "dummy" site, resist the impulse to click on an ad, which will only help the arbitrageur increase his hoard of ill-gotten gains. Vote with your mouse and insist on quality content.
Blinklist | Del.icio.us | Furl | Ma.gnolia | Newsvine | Spurl | Reddit | Technorati
Published on Wednesday, April 11, 2007
Comments:
Good point Matt, I agree with you.
Posted by: Frank
Thursday, April 12, 2007
The thing is that click payments vary from country to country. This is an important thing. When an Indian clicks an ad, the webmaster gets 1¢, but when someone from New York clicks an ad, the webmaster gets much more — can be a difference from 1¢ to $2. This is because some countries are more likely to buy something that advertiser advertised.
http://www.adrianblog.com/archives/57
Posted by: Adrian
Friday, April 13, 2007
I would be ideal if the search engines could have a reporting site for these types of sites, it could be closed to only pay-per-click advertisers. The use of these sites has made my company further restrict the amount of paid-click advertising.
Posted by: Mark
Monday, April 23, 2007
Get real everyone - clicks are a commodity, too, and can be brokered just like loans, mortgages, futures etc etc.
Posted by: John
Wednesday, April 25, 2007
I agree. People will always find ways to make a buck. You have to adapt. Just run smart campaigns. Pay-per-click is not really the best way to go to begin with. Search-engine optimization is best for the long term.
Posted by: William
Monday, May 07, 2007
In reality, arbitrageurs make Google (and all PPC businesses) more money.
A. They add volume to the PPC market
B. They do keyword research for free ... Google can then identfy more keywords for any given product.
In the long run, arbitrageurs will eliminate themselves as competition becomes more fierce and returns cost go up.
Posted by: Wii J
Saturday, May 19, 2007
I believe that arbitrage is completely unethical on the part of the search engines. Yahoo and MSN do not seem to be doing it anymore but i have seen lots of instances of pages with reams of expensive Google AdWords. Apart from driving up cost per click, this is very brand damaging to us. "Typosquatters" are buying up typos of our domain and then listing Google Ads for our competitiors on that website.
Posted by: Jude Murray
Thursday, November 08, 2007
Ecommerce Articles
- Browse All Articles
- Browse our complete archive of ecommerce articles.
- Accounting, Management & Legal
- Ecommerce articles related to managing a small business including ecommerce accounting, business strategy and legal considerations.
- Conversion & Usability
- Online business articles about converting web site visitors into customers and how to gauge and improve your business website's usability.
- Development & Programming
- Articles to help designers, developers and programmers create successful, search engine friendly ecommerce websites and improve existing ones.
- Hosting, Infrastructure & Software
- Articles for ecommerce businesses about ecommerce web hosting, business infrastructure, business strategy and helpful ecommerce & small business software.
- Interviews & Profiles
- Interviews with prominent ecommerce business personalities and profiles of successful online businesses.
- Inventory & Shipping
- Ecommerce articles about inventory management, ecommerce order fulfillment and product shipping considerations.
- Marketing & Revenue Growth
- Articles relating to online marketing, email marketing and using the Internet to growing your business.
- Search Engine Optimization
- Search engine optimization articles for ecommerce business owners, strategists, marketers and developers.
- Shopping Carts & Online Payments
- Articles covering ecommerce shopping cart platforms and options for choosing an online payment gateway.
- Training & Education
- Tutorials and articles providing training and education for ecommerce business owners and developers of ecommerce websites.
Search Articles
Ecommerce Community
- Ecommerce Blogs
- Read our blogs about ecommerce topics written by industry professionals.
- Community Forum
- Connect with other ecommerce professionals to trade advice and answers in our community forum.
- Podcasts
- Check out our ecommerce podcasts covering topics ranging from interviews to tutorials.
- RSS Content Feeds
- Subscribe to our RSS feeds and have fresh ecommerce content delivered to you.
Ecommerce Resources
- Free Email Newsletter
- Sign up for Ecommerce Notes, our free email newsletter for ecommerce business owners and developers.
- Ecommerce Directory
- Browse our directory of ecommerce products and services, or submit your own listing in our directory.
- Ecommerce Glossary
- Familiarize yourself with terminology or submit terms to help others with our Ecommerce Glossary.
- Events Calendar
- Find out about upcoming ecommerce events or invite other ecommerce professionals by posting your own event.
- Press Releases
- Browse ecommerce related press releases and post your own press release for distribution.
- Ecommerce Store & Back Issues
- Pick up back issues of Practical eCommerce magazine along with other merchandise from Practical Ecommerce
About Practical eCommerce
- Frequently Asked Questions
- Look at frequently asked questions regarded using our website, subscribing to our magazine and more.
- Advertising Information
- Information about advertising in Practical eCommerce magazine, on our website, or in our email newsletters.
- Editorial Sharing
- Learn about options for sharing our content with your visitors, customers or employees.
- About Us
- Learn more about Practical Ecommerce magazine and meet our staff.
- Contact Us
- Contact Practical Ecommerce at any time for more information. We'd love to hear from you.
Copyright 2007 Confluence Distribution, Inc. and Practical eCommerce.
All Rights Reserved.
All you have to do is opt out of content sites in your ads. I never allow content advertising on any of my PPC ads and this takes care of the problem because the ads are not displayed on 3rd party advertisers who do this kind of thing.
Posted by: Matt
Thursday, April 12, 2007