AdSense Arbitrage: Tips, Tricks & Secrets
Posted on April 4th, 2006by Michael Gray in Adsense, Advertising, Google, SEM
If you frequent any of the AdSense forums chances are you’ve come across the phrase ‘AdSense Arbitrage‘, while it’s been around for a while a lot of people don’t understand what it is, or how it works. While I’m not a big player in the arbitrage model I’ve been doing it profitably for a few months, so I can explain how I do it and share a few tips I’ve picked up. In part II AdSense Arbitrage: Keyword Selection I’ll take you through some real keyword options, and in part III AdSense Arbitrage: Automation and Button Pushing I’ll go over some ideas for automating the process I learned recently.
To start let’s take a high level view of what AdSense arbitrage is and how it works. The basic principle is to pay for a low price for keyword in an advertising program like AdWords, Overture Yahoo Search Marketing, or MSN AdCenter and direct users to a page with AdSense or another contextual advertising program on it that has higher payout. You can either bid low on the same term, looking for keywords with a large bid gap (more on that later) or you can bid on very specific keywords with little competiton and drive them to page with ads for a more general and competitive term.
Sounds pretty simple you bid $1 for a keyword, direct the traffic to a landing page with ads that pay $2 sit back and watch the profits roll in right? Well there’s a little more to it than that, it’s not rocket science but the more familiar you are with how both Adwords and AdSense works the more likely you are to succeed. Up until fairly recently most publishers were getting a 60% cut of the adwords price, $0.03 on a $0.05 bid. However now that AdSense has factored in smart pricing it’s a little more complicated. Here’s a decent explanation of smart pricing from Jensense (One poorly converting site can “smart price” an entire AdSense account - JenSense.com)
Google’s smart pricing feature automatically adjusts the cost of a keyword-targeted content click. So if our data shows that a click from a content page is less likely to turn into actionable business results - such as online sales, registrations, phone calls, or newsletter signups - we reduce the price you pay for that click.
The role smart pricing plays in your account varies from one account to the next and is an unknow variable. To keep the math here simple I’m not going to include it, but it is something you should factor into your computations. To keep things simple lets assume you are bidding $1.00 for a keyword. Again to keep things simple lets assume the advertiser is paying $2.00 a keyword, so you’ll get $1.20 a click ($2.00 * 0.6). So you pay $1.00 a click but get $1.20 a click so you make $0.20 every click, not a lot but you’re not really doing any work after you get it running so you’ll make money slowly. The problem is you aren’t going to get a 100% click through rate on your AdSense ads. Lets run some numbers using 100 users coming to your page
| Users | Cost Per Acuisition | Total Cost | $ Per Click | CTR | Income | Profit |
|---|---|---|---|---|---|---|
| 100 | $1.00 | $100 | $1.2 | 100% | $120 | $20 |
| 100 | $1.00 | $100 | $1.2 | 90% | $108 | $8 |
| 100 | $1.00 | $100 | $1.2 | 80% | $96. | -$4 |
| 100 | $1.00 | $100 | $1.2 | 70% | $84 | -$16 |
| 100 | $1.00 | $100 | $1.2 | 60% | $72 | -$28 |
| 100 | $1.00 | $100 | $1.2 | 50% | $60 | -$40 |
| 100 | $1.00 | $100 | $1.2 | 40% | $48 | -$52 |
| 100 | $1.00 | $100 | $1.2 | 30% | $36 | -$64 |
| 100 | $1.00 | $100 | $1.2 | 20% | $24 | -$76 |
| 100 | $1.00 | $100 | $1.2 | 10% | $12 | -$88 |
So what did our little experiment tell us, unless we have a 90% CTR we are going to lose money. While I’m not going to say you can’t achieve a 90% ctr, I am going to say if you did it would be pretty phenomenal. Let’s take a much more realistic CTR of say 30%. If you were able to get the cost down so you were paying $0.25 per click you would be in much better shape
100 leads @ $0.25 = $25
30 clicks at $1.2 = $36
$11 profit
$11 Profit per day isn’t a lot, in fact it’s probably going to cover lunch at the diner and not much else. So you’re going to have to find something with a lot of volume per day or look for a wider bid gap. A bid gap is what occurs when there is a large gap in bid prices for a particular keyword for example:
Bidder 1 - $10.00
Bidder 2 - $9.75
Bidder 3 - $7.00
Bidder 4 - $3.00
Bidder 5 - $1.25
There $4.00 difference between bidder 3 and 4 is a sizeable bid gap, and these are the opportunities you are looking for when you play the arbitrage game. Adwords isn’t much help in revealing bid in fact the best you can get is a kinda close guestimate, using the Overture Bid tool you can get much more accurate bid prices. Let’s assume you are going to bid 1 penny more than bidder number 5 so it will cost you $1.26 for each bid. The top bid is $10.00 so you will get $6.00 per click, so lets run some number again
100 leads @ $1.26 = $126
30 clicks @ $6.00 = $180
$54 dollars profit
Ok $54 dollars is more like it, now you can take your significant other out to dinner. But let’s slow down let’s say you are running a popular sized adsense block, good old 300 x 250. Well that size block displays up to 4 ads. If the user clicks on advertisement #3 forget going out to eat it’s left over mac and cheese for you. If they click on advertisement #4 you’ve lost money, so you better call up mom and see if you can come over for dinner.
The point to here is it may not always be in your best interest to display as many ads as possible, in many cases you can actually make more money by showing less ads, imagine that! You may even want to use single ads like 125 x 125, 180 x 180, 234 x 60 or the double 468 x 60, and 120 x 240. In addition you want to make sure you have the ads in prominant clickable spots (see Maximizing Profits With Website Design and Layout: Part II :). You may also find you have a lot more success using a landing page with no external navigation. By eliminating options the only choices are clicking the advertisements or using the back button. This means your content is going to have to “add value” along the way just be careful how you add value. Lastly if you use multiple ad blocks give each of them their own channel. If one block consistantly gets a higher CTR, have it appear first in the code so it gets the highest priced ad. Position it where ever you want using CSS. Also remember many publishers bid lower prices for contextual ads than search ads, so this could affect your ability to turn a profit, just again another factor to be aware of.
There are some other points to remember as well like cash management. Let’s say you spend $1000 on Adwords, and get $2000 from AdSense, $1000 profit so what’s the problem? You won’t be getting your AdSense check until the end of the month, and chances are your credit card bill will come before your AdSense check arrives, so make sure you can cover the expense. Letting your bill run up and giving the credit card company 18%-22% of your profit just isn’t cool. If you can’t float the money find a 0% interest credit card.
Getting your first campaign up, running and making a profit is definitely the hardest part. You probably are going to have to micromanage it for a week or two. You may even ask yourself is this worth the time? Well remember you’re just on the learning curve, once you’ve learned how to do it for one the second one is easier, the third even easier and by the fourth one hopefully you’ve found your groove. AdSense arbitrage isn’t rocket science but you do have to be on the ball, and it’s not for the faint of heart.
Next Part II AdSense Arbitrage: Keyword Selection
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April 4th, 2006 at 7:46 am
[...] Graywolf comes up with another useful series, with AdSense Arbitrage: Tips, Tricks & Secrets, and Part 1 is already up. For those that have never played the arbitrage game, it’s an interesting read to see how publishers buy traffic through AdWords, Overture, etc., and then sell your own higher priced ads to the incoming traffic. [...]
April 4th, 2006 at 10:20 am
[...] AdSense Arbitrage: Tips, Tricks & Secrets [...]
April 4th, 2006 at 8:54 pm
AdSense Arbitrage
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April 8th, 2006 at 6:00 am
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April 19th, 2006 at 10:05 pm
[...] If you’re having trouble lifting your adsense income, you might want to try a little technique that’s been bubbling just under radar for a few years now, called Adsense arbitrage. Quite a few people know about this already, but I’m often surprised by the number of people who don’t. It can really help lift your earnings quickly, if done well. Arbitrage means “profiting from differences in the price of a single security that is traded on more than one market”. In search terms, that means buying a cheap click on, say, Yahoo! , sending the visitor to a page with higher value Adsense listings, and, if the visitor clicks, you pocket the difference. You can, of course, get traffic from anywhere, but obviously the more targeted the traffic, the better. There’s an excellent three-part tutorial on this topic by GrayWolf. As the writer notes, this approach isn’t for the faint hearted, but it can pay dividends if you’re prepared to work it. [...]
April 20th, 2006 at 3:19 am
[...] Siehe komplette Artikelreihe bei Wolf-Howl: 1. AdSense Arbitrage: Tips, Tricks & Secrets 2. AdSense Arbitrage: Keyword Selection 3. AdSense Arbitrage: Automation and Button Pushing [...]
April 21st, 2006 at 4:42 pm
Well it’s a nice post but what i ask myself all the time, how will you know you get 6 $ PER CLICK as an example ^^
I mean the highest i had in my whole life where about 1,50$ or so…Ok i agree someone can manage it to have an 30% clickrate but if there is not enough space between what you pay and what you get then you have a problem.
For example, i was so “lucky” and found a few month before an keyword that payed (from the google tool point of view) 40 EURO so this will be something like 50$…I created an landing page and had some days later an fair amount of clicks, and guess what? All clicks where payed with not more than 0.80 cent. So does this fit in your concept?
If someone is able to see or even only guess what he can get per click (and we talk about every click then not only one or two times) then he is god in my eyes=) I mean i tried it more than one time and everytime i had surely an huge gap between my bid and the estimated cpc ( i even checked with the bid tool)
April 21st, 2006 at 4:44 pm
Sorry forgot…Like to show us one of your landingpages as example and not everytime this old google picture that you see anywhere?=) I would love to learn some new tricks if you really can manage this like you said in your post.
April 21st, 2006 at 5:56 pm
If I hand you everything on a silver platter you didn’t learn much. I’ll give you pieces here and there, and so will other people, you have to figure out how to put all the pieces together in a way that makes sense and “works” for you.
April 22nd, 2006 at 3:15 am
No man, didn’t wanted your knowlegde on a silver platter, only see an example for a better understanding of how you place the ads…;o)
April 25th, 2006 at 4:56 am
[...] AdSense Arbitrage: Tips, Tricks & Secrets : If you frequent any of the AdSense forums chances are you ve come across the phrase AdSense Arbitrage , while it s been around for a while a lot of people don t understand what it is, or [...]
May 3rd, 2006 at 2:39 am
[...] The funniest thing is that GrayWolf put out a how to article (actually a series) on how to do pay per click arbitrage on his blog in a three part series. I, II, III [...]
August 25th, 2006 at 2:21 am
Hi,
kann ja ein recht lustiges spilezeug für für mathematiker und statistiker sein, sich damit zu spielen. mich als marketing mann interessiert das nur bedingt - als danke seite nach einer landing page, mit der ich mir bereits die email adresse eines besuchers geholt habe.
March 26th, 2007 at 3:03 pm
Thanks for this article and the thorough calculations. Admittedly, I’ve only read a few articles about arbitrage, but none of them had any reasonable calculations or detailed examples to back up the arguments.
March 27th, 2007 at 11:45 pm
In response to finding high paying keywords and then getting low paying clicks:
This is most likely a result of other arbitrage or related sites being advertised on your site. You need to filter out websites such as “tpo10picks.com” etc etc. in order to have the high paying advertisers ads displayed. This is known as the “competitive ads filter” and should be used for anyone publishing adsense on their site.
April 9th, 2007 at 2:46 pm
Hi, Your article and the info are really good. I am with adsense for many years since, but never made good money. There is no easy method for optmization of adsense ads and nobody can finish reading its tricks. Can you please make it simple from your experience what best method works well with adsense ads.
With best wishes.
Kind regards,
Artes (Dr.)
May 1st, 2007 at 6:50 am
Thank you very much!
June 2nd, 2007 at 4:57 am
I’m confused, not with Arbitrage because I’ve been in the game for a long time but because this post has been stolen by someone.
I really like the post its got valid information but I was seriously just on a different blog with the exact same post so I’m not sure who stole the article but someones going to run into a duplicate content penalty by the engines.
Other then that this is a good description and since I’ve read it twice now I’ve still got to add that arbi is more about averages then anything else, keeping a close eye on your averages is key but we now have to get more creative with the recent Google crack down, we now need to advance to arbi 2.0 and provide the user with a bit more valuable content so we can keep Google and the advertisers happy.
June 2nd, 2007 at 9:17 am
I’m the original and unfortunately I’ve been scraped and copied to death
June 13th, 2007 at 10:51 am
Brilliant article. Thank you!!!
June 17th, 2007 at 1:35 am
Thanks for the useful information, I try get better money from this Google Adsense -;)
July 1st, 2007 at 6:00 am
Your article are really good, help me achieve more money from Adsense, thank you
July 6th, 2007 at 5:56 am
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July 17th, 2007 at 3:18 pm
Let me steal this article for my site.
http://www.dagsensecodes.com/2007/07/how-to-perform-adsense-arbitrage-1.html
I’m spammer
I’m spammer
July 18th, 2007 at 11:57 am
Thanks for this very useful stuff.
August 9th, 2007 at 11:26 pm
This is for the ideal situation if it does not include Google’s smart pricing. Smart Pricing hurts you a lot. So be careful.
August 22nd, 2007 at 4:39 pm
Hmmm, is even a 10% click thru ratio a realistic goal? I have found that CTRs tend to be more like 1% or even much less than that. I have one page on my web site about the Bush Twins which got an incredibly low CTR and incredibly high traffic on Wedneday the 16th when at least 17.5k people clicked on the page. Only 14 of them clicked on the Google ads. That’s a CTR under 0.01%. In fact only about 1% of my guests clicked on ANY linjks at all. And aside from the Google ads, which netted $2.58, I got no money-making clicks… nobody bought anything my Amazon ads, nobody bid on an eBay auction, nobody bought my book, etc.
On anormal day I get a couple hundred hits and between zero and two click-thrus.
September 5th, 2007 at 11:56 am
My question is how are we sure that we are going to get the high paying advertisement in our site?
September 26th, 2007 at 3:43 am
Your article are really good,
Thanks!
részvény elemzés
October 18th, 2007 at 4:50 pm
Only 14 of them clicked on the Google ads. That’s a CTR under 0.01%. In fact only about 1% of my guests clicked on ANY linjks at all. And aside from the Google ads, which netted $2.58, I got no money-making clicks…
wow this is very hard
October 22nd, 2007 at 7:30 pm
[...] a more in-depth explanation of adsense arbitrage via [...]
November 2nd, 2007 at 5:39 pm
[...] are also some informative posts by Graywolf on his blog here, here and here. I’d like to quote his entry on cash management (a crucial issue to consider): [...]
November 6th, 2007 at 11:42 am
But does it work in Nov 2007??
Google have there smart pricing that just blows u away now.
Are there any other good PPC to drive from?
November 27th, 2007 at 8:27 am
Thanks for this article it’s really great.
November 30th, 2007 at 3:02 pm
That is an interesting AdSense post. I have never tried this since the CPC for my subject matter is so low, it probably wouldn’t pay to bother with arbitrage. But it is an interesting concept nonetheless.
October 12th, 2008 at 11:01 pm
[...] If you want more information on AdSense arbitrage check this out: http://www.wolf-howl.com/sem/adsense-arbitrage-tips-tricks-secrets/ [...]
October 31st, 2008 at 6:40 pm
[...] popular SEO blogger tells you how he uses arbitrage with AdSense to make the most out of his AdSense [...]