Arbitration is the practice of taking advantage of price differences between markets. In real-world terms, this can mean buying something on sale in a brick-and-mortar retail location and reselling it on Amazon for profit. The goal is to make sure they pay less for clicks than they gain from sending this traffic to other advertisers. In 2007, Google started cracking down on this practice.
Arbitration can be a profitable way to earn income, but it is essential to be aware of the risks involved. In some cases, arbitrageurs have faced legal action for taking advantage of price differences. Additionally, it is necessary to be aware of market conditions and trends, as prices can change quickly and unexpectedly.
Ad Arbitrage Business Models
Ad arbitrage can be used to generate income in one of three ways. Ad networks’ most prevalent techniques are the cost per click (CPC) and pay per click (PPC). The third setup is the cost per mille (CPM), in which the publisher is paid for every 1,000 ad impressions or every time 1,000 people visit the webpage and view the advertisement. The cost per acquisition comes last (CPA). When users click on a display ad or native ad and make a purchase, the publisher gets compensation via CPA.
The tricky part of this process is directing traffic to your website. Creating a steady flow of organic traffic is challenging, even with perfect SEO practices and digital advertising. An ad arbitrage approach uses websites that will drive traffic to your website. The key to making this method lucrative is to pay less for your traffic than you make with display ads or native ads.