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  1. #1
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    Affiliate Arbitrage Article
    For some reason, I've been getting a lot of emails and phone calls lately from people who think they want to hire me to do "consulting" to help them make money from affiliate arbitrage strategies. In response, I've written an article in which I try to explain what "affiliate arbitrage" means, and why it probably won't work for most people who try it.

    http://www.markwelch.com/affiliate-arbitrage.htm

    I'd appreciate any feedback on the article.

  2. #2
    Lite On The Do, Heavy On The Nuts Donuts's Avatar
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    "ad appears (sometimes) in the left margin "Sponsored Links" section when someone does a Google Search"

    typo?

  3. #3
    Lite On The Do, Heavy On The Nuts Donuts's Avatar
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    "Unbelievably Well" says if 5%, but results figs use 4%...

  4. #4
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    I just briefly checked out a few spots and saw errors.

    "Then, your ad appears (sometimes) in the left margin "Sponsored Links" section when someone does a Google Search."

    Left? I see them on top and to the right.

    "Direct-to-Merchant Paid Search" ("Pure" Affiliate Arbitrage)

    Maybe my definition of arbitrage is off but that's just direct to merchant PPC to me, not arbitrage. I don't recall ever seeing people calling that arbitrage. But I haven't done it so I'm no expert on it. Anybody else call that arbitrage?

  5. #5
    Lite On The Do, Heavy On The Nuts Donuts's Avatar
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    ctr stuff lower down repeats "left" margin thang.

  6. #6
    Lite On The Do, Heavy On The Nuts Donuts's Avatar
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    arbitrage note box....

    "And we Google is also constantly trying to "balance" its own markets (AdSense and AdWords)"

    something after the word "we"?

  7. #7
    Lite On The Do, Heavy On The Nuts Donuts's Avatar
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    i suggest reiterating / stressing the landing page quality part of the ppc scoring and ranking system in the section you've called...

    "Shopping Site" Arbitrage

  8. #8
    Lite On The Do, Heavy On The Nuts Donuts's Avatar
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    in your section called...

    "Traditional Affiliate" or "Genuine Affiliate" Arbitrage

    you hardly mentioned the cost of ppc - some might forget your overall point is about arbitrage... suggest you add something to the last sentence like...

    In addition to the costs of ppc ads, the main "drawback" of such sites is the high investment in time to write original content and to maintain and update the sites.

  9. #9
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    http://www.google.com/search?sourcei...iate+arbitrage

    Reading many of those sites and that's what arbitrage is to me and it seems others.

    "The simplest of these sites are called "Thin Affiliates" or "Affiliate Bridges," which quite literally include only one link to a single merchant. Google now prohibits these sites from advertising through Google AdWords."

    The thin affiliates, there is actually a long thread here going thru that, it's not "literally" just one link to a single merchant, lots of different types of affiliate sites fall under that definition. Not sure about Google prohibiting it, see lots of affiliates sites like that doing PPC.

  10. #10
    Lite On The Do, Heavy On The Nuts Donuts's Avatar
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    in your section called...

    "AdSense Arbitrage" (banned)

    you may want to inform the readers that adsense (sense which ads to deliver) controls which ads show on your site, so there's some experience required to target the desired ads to show - you don't (always) get to pick the ads, so targeting issues, for the webmaster / author, can be complex.

    you might also want to mention ppa in this section. and discuss that it does give greater control to the webmaster, but monetizes from actions the advertiser chooses, not just from a click...

  11. #11
    Verbosely Virtuous Mutt spacedog's Avatar
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    Great article, Mark. I noticed several minor errors, but Donuts referred to them above so no need to repeat them.

    One suggestion I have is to separate the classifications of the arbitrage methods into similar categories; put the "banned" methods together, and rank everything in order from "best" to "worst" in terms of (1) which are most likely to be good long-term strategies and (2) which ones add best value to the visitor. Of course this latter ranking is somewhat subjective, but the marketing world and the search engines themselves seem to be coming to more of a consensus of what they consider a "good user experience". I think "black hat", "gray hat", and "white hat" might be applicable here.

  12. #12
    Lite On The Do, Heavy On The Nuts Donuts's Avatar
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    in the ABW listing, you say...

    do not ever post your own "affiliate links" on ABestWeb!

    since the rule is you can't post other's links, i think you're telling ppc'ers to keep their own stuff confidential, may want to clarify that point for your readers.

  13. #13
    Verbosely Virtuous Mutt spacedog's Avatar
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    There's a lot of confusion about what arbitrage refers to. IMO, what's emerged as the most common use of the term these days is "AdSense arbitrage", meaning using AdWords ads (or MSN, Yahoo, etc paid PPC ads) to land on web pages that are nothing but a page full of AdSense ads. Otherwise known as MFA ("Made For AdSense") web pages.

    This practice needs to be shut out of the industry, as it continues to be a huge stain on affiliate marketing's reputation. It's a very frustrating and useless thing when, as a search engine visitor, I click on an ad and I'm taken to a page simply with more ads. Then if I click another arbitrager's ad, the cycle repeats. Pathetic. Besides being a poor experience for the user, it's taking away legitimate business from other advertisers whose ads actually land on useful pages.

    Most search engines publicly *say* they ban it, but they still allow many of their advertisers to use this method. Especially their long-standing large advertisers who line the search engines' pockets with ubiquitous low-bid ads on every keyword imaginable. Examples include the MeziMedia companies (ToSeekA dot com, smarter dot com, others), shopzilla dot com, and many others.

  14. #14
    Lite On The Do, Heavy On The Nuts Donuts's Avatar
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    good article, i think it'll be helpful to anyone that reads it!

    according to your article, i do these two:
    "Direct-to-Merchant Paid Search" ("Pure" Affiliate Arbitrage)
    "Traditional Affiliate" or "Genuine Affiliate" Arbitrage

    that's all well and good... but since we interact together so often here Mark, you already know i never use the term arbitrage when referring to my work or the things I discuss here, like direct-to-merchant ppc. there are four reasons.

    posers:
    arbitrage is a power buzz word, which is why most who use it, do. it implies quick and easy wealth. it conjures up financial market gurus or speedsters that make millions in a minute. this does a disservice to the scope and effort required in the things you and I both do daily.

    actions:
    arbitrageurs are experts at timing and managing short term risk, not at promoting and positioning products or anything else related to marketing - in fact they usualy have identified a pool of known buyers and known sellers before any transactions take place. they are known for speed of execution that leverages an unordinary market knowledge level and deep pockets to move volume that takes advantage of small differences in price. they are not viewed as adding value to the equation - to the relationship between the provider (merchant, seller) and the buyer (consumer, dealer, broker). They don't focus on adding value - they focus on price differences. A true arbitrageurs, financially, is an independent party - a temporary holder of goods, even if only on paper - they seek to make a profit on the price differences caused by market inefficiencies that always exist between sellers and buyers. As an affiliate, I don't seek this from my merchants, nor from my site's visitors - I am not exploiting price differences, I am moving goods, making sales and growing the volume of my merchant's business. If, on the other hand, I bought virtual orders from my merchant and then quickly sold them to the consumer market at a slightly higher price, I'd be using arbitrage. the misuse of the term is common and widespread, so i understand why it's in your article - people will hear it and need to know what it means in our industry. but the things i do are simply not arbitrage - i have no special market place knowledge or speed of execution or aggregated volume (for discount prices) that are the classic hallmarks of arbitrage, the ones used to find profits that others cannot. the profits I find are from closing sales. when taken to the extreme, arbitrage would then be anyone who buys something and resells it... so a company that is nothing but a car dealer lot, for example, buys and sells cars at disparate prices - that doesn't make them arbitrageurs. they add value through service, local presence (like search engine listings), advertising, repairs, communication, business presence, interaction with consumers, inventory risk and much more.

    what it takes to become one:
    newbies are confused enough when they wade into our industry. if they picture me wearing a tie, in a high rise building in a financial district, making split second buying and selling decisions, reaping millions because i can almost instantly move mountains and earn a dime profit per unit... then they miss the entire essence of what i do for myself, for my merchants and for my buyers (whether they buy from my site or directly from the merchant in dtm ppc)... i help sell stuff. I am much more a marketer than an arbitrageur - in spirit, in practice, in effort and in results.

    self-image, purpose, value:
    lastly, what is the value of an arbitrageur? where it really is arbitrage in play, the arbitrageur does add value - by making markets more efficient. the exploitation of price differences, virtually always through supply and demand, quickly removes those price differences - this, in the long run, benefits those on either side of the transaction PLUS it benefits the market. arbitrage serves to reduce the bid/ask spread, which makes markets trade in higher volume. this larger volume spread risks, smoothes bumps, substantiates volume to attract other buyers and sellers and ensures the best prices are available for both side of the purchase, buyer and seller. None of the outcomes from arbitrage practices are goals of a typical affiliate marketer - the dislocation of true focus, and target value contribution, will serve to undermine every individual affiliate's efforts and goals.

    i know, that's a lot to blame on the misuse of a word - but when i hear it used in our industry, these are the things I think of it.

  15. #15
    Lite On The Do, Heavy On The Nuts Donuts's Avatar
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    by the way, i am explicitly not calling you a poser here - as some might incorrectly infer from my post above - you are clarifying things for people - that undresses posers - and I applaud you for it!!!

  16. #16
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    hey, your articlecould go... yeah, you're problably writing it for this purpose already you sly dog...

    wiki...

    http://en.wikipedia.org/wiki/Arbitrage

    "Search Arbitrage is also another way of leveraging online advertising using this market theory."

    link:
    http://en.wikipedia.org/w/index.php?...arch_Arbitrage

    link goes to an empty page...

  17. #17
    Lite On The Do, Heavy On The Nuts Donuts's Avatar
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    i feel like a wiki whore... so used... hehehee. :-)

  18. #18
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    Wow, very helpful and specific feedback, very fast! Thank you! I've tweaked the article to reflect most of these comments.

    Donuts -- Some day I will learn to tell my left from my right, and to check my math when I keep changing figures. And it was definitely a good idea to remind folks about the cost of PPC when identifying drawbacks. I recognize that my discussion of "scoring/ranking" and "landing pages" is quite thin, intentionally so, since the focus was on the arbitrage concept and not on "how google chooses which ads to display" or "how to improve your ad's position" -- my main focus for this article is to discourage clueless people from wasting time (mine or theirs), and I don't want them to think I'm providing them with a roadmap on how to do it right. Likewise on targetting for adsense ads, or talking about PPA.

    On the "affiliate links on ABW" rule, I thought the rule is, no links to sites that contain affiliate links, period, to prevent spamming; I'm not advising folks to keep their stuff confidential since the page is written for people who probably don't have anything that's actually worth keeping secret. For the purposes of the article, I just want to discourage folks from posting anything too soon, and from spamming -- again, I don't think these folks are going to understand subtle distinctions. (This last sentence is in response to donuts' post below.)

    On the issue of whether it's proper to use the term "arbitrage" to talk about "direct to merchant" or "content sites," I agree that neither you nor I ever thought of it that way before this year. I think it really is proper to refer to "direct-to-merchant PPC" as a form of arbitrage, but I agree that "traditional/genuine affiliates" with real content sites are not a form of arbitrage, so I've removed the word from that section. (Like you, my affiliate-role work is almost exclusively in "direct-to-merchant PPC" and "content sites," though I've earned some nice money from some "thin affiliate" sites in past years.)

    (I'll just leave the wikipedia issue lying on the table.)

    Trust -- I have always thought of direct-to-merchant PPC as a form of arbitrage, and have seen it pitched as part of an "affiliate arbitrage" sales pitch. On the "thin affiliates" issue, I've tweaked the wording a little bit; you wrote that you were "Not sure about Google prohibiting it, see lots of affiliates sites like that doing PPC" but in fact Google does technically prohibit it -- try searching for "Affiliate Bridge" in the google adwords help system.

    Like most of its policies that can't be easily automated, Google doesn't do much to enforce the "affiliate bridge" rule, other than respond inconsistently to complaints.

    Spacedog -- good idea to put the "banned strategies" together, though again I'm trying hard not to create a page that anybody could consider to be a "how to do it right" guide, which absolutely excludes any discussion of "hat colors."
    Last edited by markwelch; June 25th, 2007 at 03:54 PM.

  19. #19
    Lite On The Do, Heavy On The Nuts Donuts's Avatar
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    Quote Originally Posted by markwelch
    On the "affiliate links on ABW" rule, I thought the rule is, no links to sites that contain affiliate links, period, to prevent spamming; I'm not advising folks to keep their stuff confidential since the page is written for people who probably don't have anything that's actually worth keeping secret.
    Shoot, I think I'm confusing two things by talking about them together.

    Rule #5:
    "Any Identity or site revealing of any sort will result in an IP Ban."
    As an ABW memeber, I can't tell other people about whose aff site is whose - respecting each others privacy. However, if I wanted to (which I don't personally choose) I can tell others here what my sites are - because they're mine.

    Rule #4:
    "Any Spam will result in an IP Ban."
    This is different from revealing a site, it's dropping commercial links. If someone's using ABW to promote their site (or any aff programs they're in using links that track), Mods will nab them lickety split.

  20. #20
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    Think you're missing a word here.
    Some affiliates seek to the "thin affiliate"
    Perhaps, "seek to avoid the" ?

    Interesting on the thin affiliates thing, I didn't know it was banned. I thought it was part of the reason for the landing page quality score algo.

    I have also created a number of "thin affiliate" web sites, and I also run "direct-to-merchant" PPC campaigns which are profitable.
    Just to clarify, do you still run thin affiliate sites and are grand fathered in or have you stopped running them?

  21. #21
    Lite On The Do, Heavy On The Nuts Donuts's Avatar
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    Quote Originally Posted by markwelch
    (I'll just leave the wikipedia issue lying on the table.)
    I hope you publish it there - better to have someone who knows what they're doing and isn't all smoke and mirrors guru bs type.

    No matter where it's pub'd, as always, nice chatting with ya!

  22. #22
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    "Interesting on the thin affiliates thing, I didn't know it was banned. I thought it was part of the reason for the landing page quality score algo."

    It's not. I never knew Donuts did arbitrage and lots of it It's still direct to merchant PPC for me, this is the first time I've ever seen it called arbitrage.

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    knight01 -- thanks for the feedback, you were right that I needed to add "avoid."

    I think that thin affiliate sites do earn high quality scores, for product-name searches and for some product-category keywords. I don't know if Google looks at "duplicate content" in assigning a quality score.

    On your last question, I think there might be some "gray hat" issues involved.
    Last edited by markwelch; June 25th, 2007 at 04:20 PM.

  24. #24
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    thin affiliate sites are banned (which doesn't mean G is perfectly efficient at finding them all, but your time will come sooner or later, probably sooner).

    adwords editorial requirements:
    https://adwords.google.com/select/guidelines.html
    ~~~~~~~~~~~~~
    Affiliate Policy

    We allow affiliates to use AdWords advertising. Please note that we'll only display one ad for affiliates and parent companies sharing the same Display URL per search query. We also monitor and don't allow the following:

    Redirect URLs: Ads that contain Display URLs that automatically redirect to the parent company.

    Bridge Pages: Ads for webpages that act as an intermediary, whose sole purpose is to link or redirect traffic to the parent company.

    Framing: Ads for webpages that replicate the look and feel of a parent site.
    ~~~~~~~~~~~~~
    A bridge page and a thin aff site are one and the same thing.

    Another good link for affiliates that want to use adwords ppc for ads:
    "What should I know as an affiliate advertiser?"
    http://adwords.google.com/support/bi...68&topic=10614

  25. #25
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    "thin affiliate sites are banned"

    What?

    This jumped off that whole discussion awhile back:

    http://affiliateprograms.articlesarc...ffiliates.html

    And there is a link to the Spam Recognition Guide For Raters in there.

    Affiliate arbitrage explained:

    http://blog.affiliatesummit.com/2007...age-explained/

    This is a better one, explaining the diffferent ones, adsense arbitrage, search arbitrage, affiliate arbitrage etc.

    http://www.bloglyne.com/2007/06/03/s...filiates-care/


    It's not direct to merchant PPC. It seems like you're trying to redefine it but search Google on that topic and there are many articles explaining it, but you won't find direct to merchant PPC being mentioned, I haven't seen it. First time I've heard it was here today. Just all kinds of posts on it:

    http://www.google.com/search?sourcei...iate+arbitrage
    Last edited by Trust; June 25th, 2007 at 04:19 PM.

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