What is Ad Arbitrage? Does It Work and What Are the Risks?

Arbitrage strategy is the monetization of buying something and selling it for more than you paid. Arbitrage as a business model is commonly used on Wall Street, the real estate market, and more ━ but it can be risky business. Now ad tech uses these formats to push digital advertising through blogs and other free websites. 

Ad arbitrage is a way for publishes to make more money from their ads through purchased website traffic. So, those with recipe blogs or advice websites can imbed native ads into their writing or show display ads that create revenue. 

Most companies, like Amazon, will pay the publisher or owner of the site a specific rate per click, so the more ad impressions your site makes, the more profitable it will be. More traffic on the website means more ad impressions, allowing you to make more money.

Ad Arbitrage Business Models

There are three standard ways to make money through ad arbitrage. Cost per click (CPC), or pay per click (PPC), is the most common method in use by ad networks. Another set-up is the cost per mille (CPM), in which the publisher receives pay for every 1,000 ad impressions, meaning every 1,000 instances that someone visits the webpage and views the ad. Lastly, there is a cost per acquisition (CPA). CPA compensates the publisher when visitors make a purchase via their native ad or display ad. 

The tricky part of this process, though, is directing traffic to your website. It is challenging to create a steady flow of organic traffic, even with excellent SEO practices and promising digital advertising. An ad arbitrage strategy uses websites that will push traffic to your webpage. The key to making this lucrative is to pay less for your traffic than what you make with display ads or native ads. 

Does Ad Arbitrage Actually Work?

Ad arbitrage can be a profitable business model. Publishers and bloggers have turned it into a full-time, well-paying career. When buying traffic, you must ensure you pay less than the profit you expect the traffic to bring you. 

Another must for being successful with ad arbitrage is an organized and enticing webpage featuring quality content that is easily digestible for readers. Companies that perform media buying on lesser-known sites often save money compared to platforms like national magazines, increasing ad revenue and impressions. 

Although the webpage should be accessible and attractive to visitors, the on-page optimization should be focused on ad revenue. The revenue-driven design makes it less appealing to users but necessary to profit. 

The most successful publishers that use ad arbitrage strike the perfect balance between the quantity and type of ads, and quality content. Too many busy ads and pop-ups will deter people from visiting and enjoying your webpage. However, without prominent ads, you presumably will not make money.

Native advertising is one of the best ways to strike the right balance because the ads flow along with the content, rather than intruding upon it. 

In a sense, all the stars must align for successful ad arbitrage, but it is far from impossible to achieve. An optimal traffic source can be your ticket to monetizing your webpage. 

How to Get Traffic For Ad Arbitrage

As discussed, you must pay less when buying traffic than what you will make through the ad impressions. This model is the only way that traffic arbitrage can work for you. That does not mean the cheapest traffic available is the one for you. 

In fact, the quality of traffic is just as important as the price. Expensive traffic can result in better ad impressions and a more profitable arbitrage, while cheap traffic can result in little to no profit. 

If the traffic you buy is a demographic uninterested in online purchases or the products you advertise, your click-through rate (CTR) will be low. A CTR like this exemplifies what bad traffic looks like. For reference, the click-through rate is the number of times an ad is viewed divided by the number of times a visitor clicked the ad. If 10,000 people view your page, but only one person clicks on the ad, this is not a fantastic CTR. 

On the other hand, social media advertising can target specific demographics suited to your ads. Everyone from commercial businesses to teenagers is on social media platforms, so you can reach a broad audience this way. As a result, you’ll likely have traffic that converts.

To begin your ad arbitrage business model, you should test different ad networks to decide the optimal one to drive traffic to your website. 

Google AdSense

Google AdSense is a resource for driving traffic to your website and showing relevant ads to your viewers. Adsense gives the bloggers and advertisers more customizability in how and where they want their ad displays. Google uses keywords to match relevant ads to your site to improve the likelihood of clicks. 

The best part about AdSense is that it is free to use, and you receive most of the money made through the ad impressions and clicks. Publishers get around 70% of the revenue generated through an ad click. 

Google is useful because few people do not or have never used google. Even if you aren’t present on social media, you likely have googled something in your lifetime. However, the most popular solution isn’t always the best. Below are additional options you may want to consider as better fits for your business and goals, and here you can find a more comprehensive list of 17 alternatives to Google AdSense.

Facebook Ads

When setting up Facebook advertisements, you have a few different options: engagement, app installs, video views, lead generation, and traffic. You can choose to lead the user to a desktop page, mobile app, or messenger service. 

Social media outreach is a promising way to draw people to your site so they can click on the ads that pay you. Facebook does charge you to place your ads. Most businesses spend between $200 and $800 on Facebook advertising every month. However, you pay per post. Therefore, you can limit your posts in the first month you test out this method. 

Depending on your content and subject matter, Facebook can be a lucrative option. Fashion blogs, recipe collections, or other lifestyle webpages are often successful with Facebook advertising as it mimics that casual social media experience offered by Facebook.

Outbrain

Outbrain focuses on native advertising, which is often more pleasant for the user experience. Native advertising is less intrusive to your webpage and will not bombard visitors with pop-ups, banners, or scrolling videos. The advertising focuses on specific demographics that will be interested in your webpage.

Companies like CNN and BBC use Outbrain to boost their traffic and create ad revenue, but their pricing model can cost you more than you make. Outbrain charges you PPC, so every time someone clicks your ad and someone goes to your site, it costs you money. But a visitor on your webpage does not guarantee the ad on your site will be clicked. This ambiguity is one of the risks you take in ad arbitrage. 

Outbrain is one of the easiest ad networks for beginners to use, so it is a perfect place to start testing out different arbitrage sites to see what works for you. They require a minimum investment to use their platform, which may be too much for some smaller businesses. 

Taboola

Taboola helps you create enticing campaigns to lure people to your content. This strategy makes them one of the best methods to build a strong brand identity and get your webpage’s name out there. Taboola also has a prompt support service if you are new to ad networks and need guidance. 

To get started with the Taboola algorithm and test it out on your website, you only need to spend $10 a day. This amount adds up fast but is worth it if you see a significant increase in traffic to your website. Taboola pays its users in two ways, either pay per click or cost per mille, so you can make money from clicks and impressions. 

A possible downside of using Taboola is that it can take a while to get the ball rolling, and you’re paying every day anyway. Taboola allows you to modify campaigns after receiving feedback and statistics. This opportunity is an effective way to optimize your ads to target your audience better. But it means the campaign may not be successful when first put up. 

Yahoo Ads

Many people have moved away from Yahoo! Gemini, but that doesn’t mean the company can’t help drive traffic to your website. It is still the second most used search engine after Google. 

To start, you need to apply to the Yahoo! ad directory and become a part of their ad network, which can take weeks or even months. If you want something more immediate, you can pay for Express Yahoo!, but it doesn’t offer much of a guarantee. 

Being on the Yahoo! Directory means they will display your ads, but you can also pay between $5 and $300 a month for a featured spot on the list. Having a featured spot means your ad will appear to people more likely to click on it. 

Since Yahoo! offers a variety of pricing plans, it is popular among small businesses just getting started on the internet. Yahoo! is relatively inexpensive yet still effective in driving traffic. Like with all traffic resources and ad networks, you’ll need to test out the company before committing.

Quora

Quora is an ad network ideal for self-starters and people with ad experience. They don’t offer much customer service, so you need to have some foundational knowledge to use it successfully. 

Its pricing has to do with the competition for the ad placement and what niche your ads fall into. Industries like real estate and finances usually cost advertisers more because they have high click-through rates.

They use a CPC and CPM model, so you can make money via clicks or impressions, depending on which will be more lucrative for you. They charge your account when your spending meets specific billing thresholds. Thresholds begin at $25, rising to $50, $250, $500, and $750. 

One of the reasons that Quora is a self-serving site is because its algorithm is strong, targeting viewers based on various aspects. These aspects include behavior, engagement percentage, contextual targeting, and so much more. 

Revcontent

If you have a sleek website and want a memorable brand identity, Revcontent focuses on only the highest quality publishers and best websites. Messy websites or subpar content will result in a rejection from this ad network. If quality content and maintaining a sense of decorum on your website is a core value, Revcontent could be the ideal traffic resource for you.

The company has attentive representatives ready to help you perfect your brand image and create an effective funnel or traffic. If you can’t stand the intrusive ads on your website, Revconetnt can help you develop a more attractive advertising platform, so you can make money while preserving your webpage. 

However, because Revcontent focuses so much on the quality of their publishers, most small businesses do not qualify for their network because they have a minimum traffic requirement. Experimenting with Revcontent is a good idea but may not be the right ad network if you are stepping into ad arbitrage for the first time. 

What are the Risks of Ad Arbitrage?

Unfortunately, there are many risks involved with ad arbitrage that can result in lost money. One risk is that you spend more on acquiring traffic than you make from the presence of that traffic. It’s crucial to monitor your spending and income to determine whether or not the business model is effective. 

Another issue publishers run into is a simple lack of space on their website. If all of your ad inventory, meaning available space on your site, is full, you don’t have more opportunities to showcase products despite having the traffic you want. 

Additionally, different markets are constantly in flux when it comes to prices. Your advertisements may decrease your pay rate, but your traffic resources stay the same. Industries evolve and fall out of popularity, and these trends can be tough to predict. On the other hand, your advertisements may pay the same, but the traffic resources increase their prices. 

Perhaps the biggest risk to publishers is the danger of losing ad earnings. In truth, most advertisers have a strong distaste for bought traffic. This can give publishers issues with approval (by certain advertisers or networks), or worse— a site band. Sure the idea of arbitrage is enticing, but is it worth your ad revenue?

The importance of being aware of your profits and expenditures cannot be overstated. Newor Media offers high-end technology to provide analytics and overviews of the success of your ads. We work directly with publishers to help them optimize their websites and monetize their brand. Optimizing your ad space and website performance is an easy and safe way to increase earnings — no purchase necessary. 😉

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