While often cliché to do so,
it might help those who have often found the notion of
search engine arbitrage (SEA) confusing to read the
dictionary definition of “arbitrage.” According to m-w.com,
arbitrage refers to “the nearly simultaneous purchase and
sale of securities or foreign exchange in different markets
in order to profit from price discrepancies.” While a word
more easily associated with the financial markets might not
seem applicable to search engine advertising, its use in our
space makes sense when realizing that the purchase of
keywords (as well as other ad space) is very much like the
purchase of securities. More importantly, besides internet
advertising containing many market characteristics, multiple
pricing options exist too.
As it pertains to our
industry, people more commonly use the term arbitrage to
refer to any risk taking activity where one pays out on a
different metric than one is paid. This is exactly the case
with SEA. Those practicing SEA will purchase keywords on a
CPC basis yet get paid on a CPA basis. Many search firms
will work in this manner, but the distinguishing
characteristic between search firms held accountable to a
CPA and those practicing this type of arbitrage is the level
of exclusivity the agent has with the advertiser.
Arbitragers are one of many rather than the exclusive
representative.
Those practicing SEA could be
the only bidder for a keyword, but more often than not they
are one of many driving traffic for an advertiser. What this
means is that were a person to type “dental insurance”
into Google, they might see several paid ads for the same
product (site). Those doing SEA would have had an “aff” in
their ad text to signal that they did not own the site to
which traffic was being sent.
https://www.lynxtrack.com/signup.php
At the ten thousand foot view,
when setting up AdWords Google had the option of either
accepting traffic for the same root URL for the same keyword
from more than one advertiser or not. They opted to allow
it, a decision consistent with their overall flexibility and
free-market nature. The ultimate decision for when policies
change depends on the user experience. If Google perceives
any of their actions reduce the level of user satisfaction,
they will take action. Unhappy users mean fewer visits and
en masse a significant drop in their reach. And no matter
what others might think, without traffic, Google is not
Google. Therefore, in order to stem any exodus of users,
Google decided to implement the Affiliate Policy Change.
One can surmise from the
change and their desire to improve user experience that
Google saw the proliferation of the “affs” as leading to
decreased loyalty and less money. Were there only one “aff”
per term, chances are that they would not have made any
changes. Instead of one or two ads for a particular ad, for
many terms almost all ads were various pitches for the same
end product. Google’s policy change addresses the confusion
by now only displaying one ad per URL being advertised.
Again, in a smart decision, rather than simply ban any
affiliate from advertising, they allow the same number of
people to bid, but increase the competitiveness. Google
users now see only one ad per site and affiliates no longer
have to include the “aff” designation.
Given that the policy has been
in place for two months, the next logical question to ask is
how well it is working. From an affiliate perspective, the
policy has made a difference. Those relying on Google report
increased difficulty getting clicks and lower overall
earnings. From the end-user perspective, the policy’s
efficacy is somewhat mixed. A quick test suggests that the
change has made a difference but that abuse still exists.
That abuse exists does not come as a surprise. Google should
ultimately catch the abuse quicker than most. They are
Google and automation and deployment is their specialty. As
such, it would appear that they, probably with ease, can look
at the display URL entered by the advertiser and compare
that with the actual destination URL. They can then compare
their results easily across all advertisers and campaigns.
Since no human reviews each posting, the barrier to abuse is
still quite low, and like natural search spam it becomes a
game of cat and mouse.
Unfortunately, those choosing
to abuse the system only hurt our industry as a whole and
like email hasten an industry’s demise. We can only hope
that the advertisers and networks with the offers can help
insure the survival of this arbitrage as it adds value and
enables market inefficiencies to be reduced.
Jay Weintraub
