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PPC vs. Affiliate Arbitrage - Part 1
by Editor
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Earlier this week, the ever acquisitive ValueClick announced that it added a new company to its interactive marketing mix. We hadn't read the release when asked what we thought Valueclick paid for the 4th ranked comparison shopping site MeziMedia, operators of Smarter.com. If you still don't know the price, stop now and visit Mezimedia.com. What do you think the company made in 2006? We guessed 25 million. Turns out the company earned $40 million last year and that Valueclick has agreed to pay $100 million. And, that's just the starting point. If MeziMedia hits its number, they stand to push the total price past $350 million. Look at their growth here, especially compared to leader Shopping.com, and the price starts to make sense.
Valueclick companies, though, always seem to have a layer of revenue that hides beneath the surface. Webclients has their enormous incentive promotion business. MeziMedia has PPC Arbitrage. A company that, at one point, earned 90% of its revenues, not from comparison shopping but, from buying traffic on non-Yahoo search engines and sending their traffic to other search listings. Valueclick always seems to pay a fair price and pick companies that know how to make more money under their wing. As a result, I expect the same to hold true for MeziMedia. It does, though, make for a good time to examine the PPC arbitrage landscape. Normally, this means focusing on those doing CPA arbitrage, such as our recent research on Blockbuster. Today, we look at two different types of arbitrage - buying search to send to other search listings and buying search to drive affiliate commissions. We begin with those who spend on clicks to drive traffic to higher paying click traffic.
A. Domainers - this first group has in their own way always done arbitrage and earned revenue off click traffic. The rise of search has not only enabled them to earn more money on their type-in domain traffic (and as a result increase the sale price), it has also become a means for the more savvy to drive traffic to their names. Some might buy traffic to try and make the domain look more valuable than it is, but many domainers just like opportunities to make more money. They already have the mindset of risk, so search simply represents an extension of that. The two examples here come from affiliates using the parked pages as a means to have an optimized and keyword relevant page.
#1 Allonlinecoupons.info - An affiliate's domain that uses a parking service of the publicly traded Marchex
Restaurant Coupons
Find Restaurant Coupons Here.
Search for Restaurant Coupons.
AllTheRestaurantCoupons.info
#2 Alltherestaurantcoupons.info - An affiliate domain that points to a TrafficZ domain parking page
Coupon Deals
Get A Low Price With Our Coupons.
Find Coupons
wwwCoupon.org
B. Yahoo Arbitrage - these sites will look similar to the domainer pages above; the first example is actually a domain company, Name Meida buying directly for its own names. You can find Marchex buying as well for sites like wwwcoupon.org (not www.coupon.org). The second example, Target Visibility FZE, i.e. 07deals.com, hails from Dubai and generates a reported four to six million monthly through arbitraging the Yahoo feed. Number three is a classic Yahoo feed arbitrage much like Mezi's ToSeeka.com.
#1
Boot Camp
Kids Misbehaving? Find a Brat Boot
Camp in Your Area Here. Look Now!
www.BootCampServices.com
#2
GPS Navigation
Find GPS Navigation Systems
GPS Navigation Price Busters
electronics.07deals.com
#3
Tractor Trailer
Free Tractor Trailer info
Find what you're looking for!
www.TheTrailerGuide.com
C. Directory / Comparison Shopping - I would put the older version of Smarter.com in this category, i.e. a site that looks like a comparison shopping site, but instead of earning money across a wide variety of merchants, the majority of money comes from a single search feed. The small, but also publicly traded company, Local.com, falls into this category. While they have more technology or perhaps we should say more on site experience than the average click arbitrager, they make their money from one or two partners. Compare that with a Shopzilla that has thousands of merchants. To note, examples two and three could belong in the Yahoo category, but they take a slightly different approach, so we've put them here.
#1 - Local.com
Coupons
Looking for Coupons info
in Los Angeles? Find it here!
www.local.com
#2 - Insights1.com
John Deere Tractors
John Deere Tractors Offers
Save on John Deere Tractors
John-Deere-Tractor.Insights1.com
#3 - Top-Listings.net
John Deere Tractors
John Deere Tractors Offers
Save on John Deere Tractors
John-Deere-Tractor.Top-Listings.net
D. Made For Adsense (MFA) - Perhaps not the earliest but certainly some of the most well known PPC arbitrage sites fall in this category which have diminished in presence as Google's quality score updates have progressed. As seen by this screen shot, the Made For Adsense sites, i.e. those that buy traffic on Google as an advertiser in order to earn money off Google as one of their publishers are down but not out.
#1
John Deere Tractors
Looking for John Deere Tractors?
Find John Deere Tractors info here.
constructionandfarmequipment.com
The arbitrage discovery continues in Part 2 where we look at a different type, those who still buy clicks but earn money only when some form of transaction occurs. Historically, these search buyers have faired better with respect to quality score, but their sites often require more manual work and cannot scale as well.
- I would put the older version of Smarter.com in this category, i.e. a site that looks like a comparison shopping site, but instead of earning money across a wide variety of merchants, the majority of money comes from a single search feed. The small, but also publicly traded company, Local.com, falls into this category. While they have more technology or perhaps we should say more on site experience than the average click arbitrager, they make their money from one or two partners. Compare that with a Shopzilla that has thousands of merchants. To note, examples two and three could belong in the Yahoo category, but they take a slightly different approach, so we've put them here.#1 - Local.com
- I would put the older version of Smarter.com in this category, i.e. a site that looks like a comparison shopping site, but instead of earning money across a wide variety of merchants, the majority of money comes from a single search feed. The small, but also publicly traded company, Local.com, falls into this category. While they have more technology or perhaps we should say more on site experience than the average click arbitrager, they make their money from one or two partners. Compare that with a Shopzilla that has thousands of merchants. To note, examples two and three could belong in the Yahoo category, but they take a slightly different approach, so we've put them here.#1 - Local.com
- I would put the older version of Smarter.com in this category, i.e. a site that looks like a comparison shopping site, but instead of earning money across a wide variety of merchants, the majority of money comes from a single search feed. The small, but also publicly traded company, Local.com, falls into this category. While they have more technology or perhaps we should say more on site experience than the average click arbitrager, they make their money from one or two partners. Compare that with a Shopzilla that has thousands of merchants. To note, examples two and three could belong in the Yahoo category, but they take a slightly different approach, so we've put them here.#1 - Local.com
- I would put the older version of Smarter.com in this category, i.e. a site that looks like a comparison shopping site, but instead of earning money across a wide variety of merchants, the majority of money comes from a single search feed. The small, but also publicly traded company, Local.com, falls into this category. While they have more technology or perhaps we should say more on site experience than the average click arbitrager, they make their money from one or two partners. Compare that with a Shopzilla that has thousands of merchants. To note, examples two and three could belong in the Yahoo category, but they take a slightly different approach, so we've put them here.#1 - Local.com
Editor
DM Confidential
www.dmconfidential.com
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Great read as always. We're actually starting to see more convergence amongst search marketing, shopping engines, and direct navigation vehicles. I don't mean to have the intention of comment spam, but here are some examples and ways we are converting direct navigation (domainer) traffic into shopping comparison.
www.pp-ipods.com
www.pp-cameras.com
www.pp-dvds.com
Although the intent may be to "arbitrage" Google to Google with the large shopping engines, there is still value in shopping comparison and networks of e-commerce advertisers can nicely complement a search-based monetization model to turn "arbitrage" type advertisers into more traditional direct-response models by buying traffic (say from a source like Google) and driving traffic to an engine that also happens to have paid search listings. To be picky, by your definition eBay would also be considered an arbitrage advertiser, although eBay is well known and the brand backs up the direct conversion on the first or subsequent visits. I think the purpose whether the intent is clear or not is to mitigate the risk of buying online media by having the backup plan of a well oiled monetization model in case the user isn't quite ready to swipe the credit card.
Posted by: Roy Barrett Date: July 20, 2007
URL: http://www.parkingpanel.com/
189000
Great overview of PPC vs Affiliate Arbitrage!
Posted by: Jake Date: December 31, 2007
200316
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