In 2006 Jake Baillie highlighted the wonderful world of search arbitrage:
Why engage in arbitrage? Because we like to make money; bootstrapping new sites, out of stock inventory and inflating Alexa traffic rankings. Who are the arbitrageurs? Yahoo Shopping, CNet, Shopping.com, Verizon, Info.com, PriceGrabber, NextTag, eBay, etc. arbitrage isn’t just for MFA sites. Real businesses are using arbitrage as part of their “real” business model. Arbitrage is not a “shhh…” word. It will continue to grow… It will make the space more competitive. Search engines will attempt to grow revenue from arbitrage.
At first blush it wouldn’t seem like buying clicks and selling them back to other advertisers would be very profitable, but it was so profitable that American Capital Strategies Ltd. invested $160 million in GeoSign for a minority stake. That investment put arbitrage on the map & forced Google to make an example of GeoSign:
The end came suddenly, well before Nye and American Capital could reposition the business – in fact they were still hiring new employees in the days leading up to the layoffs. Google had started to look more closely at companies like Geosign, which were buying keywords from Google and ad links from Yahoo! or another provider. And soon Geosign got word that Google would now begin penalizing its Web pages that had “a low landing page quality score” – that is, lots of ads and little or no original content. While Google won’t comment specifically about Geosign, sources say it raised the prices it charged Geosign for keywords overnight.
In the years since GeoSign has split into 2 companies (GeoSign & Moxy Media) and the world of arbitrage has died down. As stuff wound down Moxy Media was awarded a $97,900 grant from the Canadian government as the end was near.
So that was the death of arbitrage.
Or was it?
According to the Globe and Mail, Moxy Media’s Ted Hastings was one of their top 40 under 40:
When American Capital bought Geosign and formed Moxy Media in Sept., 2007, Mr. Hastings was named president and CEO and helped increase the company’s earnings before interest, taxes, depreciation and amortization by 375 per cent in 2009 over 2008, he says. The company now owns and operates more than 300 consumer information websites.
Over the past few years well known domainers have been highlighting how the declining ad market and arbitrage have killed their revenues. Rick Schwartz recently asked: “For example, now that ppc is down 75% or more, do you still want to value your domain on a multiple of ppc???”
Frank Schilling added “Increasingly the major keyword marketplaces such as Yahoo and Google have taken that high quality traffic and dumped it into the same keyword marketplace hopper with arbitrage, garbitrage, and other forms of toolbar crap. That traffic then gets smart priced and shaved down under the guise of “quality control” resulting in pay-rates for domain traffic which are held artificially low. Our traffic underperforms it’s historical averages and we get paid way less than we should.”
With Yahoo! Search Marketing transitioning to Microsoft adCenter the world of arbitrage was supposed to evaporate. But after Google wiped out affiliates, it appears that left an opening for the rebirth of search arbitrage. Most users and advertisers are used to seeing to Ask.com arbitrage Adwords to internal sponsored links, but even Ask doesn’t get as blatant about it as info.com.
This is a query from today, October 14, 2010, not 5 years ago:
Google allows this high quality landing page experience:
How have they fared since low quality advertisers were purged from the system in 2009?
It’s like 2006 all over again:
Why engage in arbitrage? Because we like to make money; bootstrapping new sites, out of stock inventory and inflating Alexa traffic rankings. Who are the arbitrageurs? Yahoo Shopping, CNet, Shopping.com, Verizon, *Info.com*, PriceGrabber, NextTag, eBay, etc. arbitrage isn’t just for MFA sites. Real businesses are using arbitrage as part of their “real” business model. Arbitrage is not a “shhh…” word. It will continue to grow… It will make the space more competitive. Search engines will attempt to grow revenue from arbitrage. It’s not set and forget when it comes to traffic quality.
Google has $33.4 billion in cash & just reported record quarterly results: “Non-GAAP operating income in the third quarter of 2010 was $2.93 billion, or 40% of revenues.”
If they don’t need affiliate money then why are they opening themselves up to the (g)arbitrage game again?