What is Ad Arbitrage?
Pay $1 for website traffic, make $2 from display ads.
That’s ad arbitrage.
Such a simple concept, but not so easy to pull off, even during the ad arb heyday.
Ad arbitrage is when a website publisher (aka owner) buys traffic to a web page with display ads where the cost of that traffic is less than the revenue earned from the display ads.
In other words, the publisher profits from buying traffic monetizing solely with display ads.
Two on-site strategies:
The pagination strategy breaks up the content across many pages with pagination. Visitors must click “next page” buttons resulting in multiple page views with each visit. The result is that multiple page views per visitor result in many ad impressions increasing the EPMV to levels that generate more revenue per visitor than is spent on cost per click for the visitor.
2. Long-form content:
This on-page content strategy is creating exceedingly long and highly engaging content where visitors end up spending an extraordinarily long time on each page. With the use of floating (aka sticky) display ads as well as many ads peppered throughout the long content is the visit will generate sufficient ad impressions and refreshes so that the revenue per visitor exceeds the cost of the ad click that brought the visitor to the site.
Another critical piece of the equation is that the ads must be highly engaging resulting in an abnormally high click-through rate. This results in a lower cost per click for the ads making profit more likely.
Paid Traffic Sources
Publishers advertise on a variety of channels (aka platforms) such as Facebook, Outbrain, Taboola, Yahoo Gemini, Push Notifications and Quora. These channels reward high click-through rate ads with low cost per click ad rates.
This strategy was widespread before 2016 when Facebook ads were cheaper although it’s still used today, especially native ads arbitrage (Outbrain and Taboola).
Huge profits can be earned with successful ad arbitrage campaigns if the ad-buying campaign can be scaled. For example, if you manage to generate a 40% profit on ad-spend and you spend $100,000 per month, that’s $40,000 net profit.
Is ad arbitrage still effective?
Yes, Ad arbitrage is still a viable strategy and is being used today. Wherever you see Outbrain native ads on sites, some of those ads are being used for native ads arbitrage.
It’s not easy
You need to generate a very high EPMV in order to make this work. For example, if you manage to get your paid traffic down to $.04 per click, that means you need an EPMV of $40 just to break even. A $.04 cost per click on ads is not easy and neither is a consistent EPMV of on an engaging clickbait piece of content (i.e. usually not buyer intent content and even if it is buyer intent, visitors via the ads usually have no intention of clicking affiliate links and buying something).
4 years ago ad arb was big, largely due to relatively cheap Facebook ad traffic.
I stumbled on it, and rode the wave for 2.5 years. It was a great ride.
Unfortunately, arbitrage opportunities by their very nature, end. Arbitrage in its strict sense, is earning profits without generating any value. With ad arb, more and more people enter the easy money market forcing ad revenue down and cost of traffic up. While it’s referred to ad arb, I do dispute the “no value” opinion since visitors to gain value from the content, but I digress.
The key enablers of ad arb, AdSense and Facebook, put the squeeze on it as well. AdSense cracked down on high ad CTR by removing text ads and/or nessie arrows. Facebook cracked down on sending paid traffic to thin content pages (i.e. heavy pagination).
The result is ad arb, while still possible if you really work it, is not easy. In fact, it’s very difficult in today’s environment.
2 years ago I saw the writing on the wall. My margins were still decent, but narrowing. I realized the party would end and so I needed to adjust to the changing environment.
My options were:
- Increase revenue per 1,000 visitors so paid traffic would pay;
- Find lower cost paid traffic; or
- Focus on free traffic.
I ruled out lower cost paid traffic because I didn’t want to risk bad traffic to my AdSense monetized site.
I played around with increasing revenue per 1,000 visitors with various ad networks, affiliate offers and email marketing, but nothing panned out. I could tell quickly that doubling RPM wasn’t feasible with non-AdSense options.
That left me with shifting focus from paid traffic to free traffic.
Fortunately I had some organic search traffic and site authority because despite doing plenty of ad arb, my content was fairly long-form and good.
Unfortunately, I totally ignored keyword research by focusing on titles and content that attracted clicks instead of hauling in organic search traffic.
I had some okay Pinterest traffic, but Pinterest is not nearly so formulaic as SEO traffic which makes Pinterest traffic hard to generate consistently (it’s still worth doing though because it’s the best social traffic for many niches IMO). Besides, Pinterest changed its algo to a smart feed around the same time making it even more unpredictable.
And so it was time to return to SEO. I got my start online with SEO pre-Penguin. After a 4 year hiatus, it was time to rev up the SEO engines again, albeit with a great deal more caution.
My 2-year adjustment
After a 4 year SEO hiatus, I had a lot to learn. I knew the basics and had some okay organic search traffic, but it was only the tip of the iceberg.
I read everything SEO related. I analyzed the organic search traffic I was getting to see what was working. I studied, experimented and came up with a very simple plan.
My plan was to focus on long tail keywords that wouldn’t require much, if any, off-site SEO (i.e. link building). I had and still have an aversion to proactive link building because it amps up the risk and is also extremely boring.
I’m a content guy. I love keyword research, planning content and publishing awesome content that covers very specific topics. That’s long tail in a nutshell.
I didn’t settle on this plan as a result of anything I read. I settled on it because my best performing organic search content at the time was long tail. If it ain’t broke, don’t fix it.
I consulted my friends at Authority Hacker about the best keyword research tool and they suggested Ahrefs. I yanked out my wallet and bought an Ahrefs subscription.
Ahrefs blew my mind
If I have any regrets about my ad arb days, it was my failure to learn and incorporate the art of keyword research with advanced tools like Ahrefs. Actually, my other regret is not buying more traffic than I did, but that’s besides the point.
I spent days and weeks monkeying around with Ahrefs Keyword research tool and stumbled on some serious massive lists of long tail keywords for my site. I continue investing time each week looking for keywords.
I started ordering content in bulk – 30,000 to 60,000 words at a time publishing content as fast as I could. Since my restructuring efforts started paying off big time three months ago, I’ve increased my content orders to 50K to 100K words per month. I also now publish quite a bit of quality guest posts on my site using this strategy.
While I published reams of content, I also need to tighten up my site. With ad arb I published a lot of similar content across hundreds of posts. While it was long form, I needed to merge and delete much of it. I spent 8 months totally restructuring my site eliminating over 250 URLs in the process.
I also improved site navigation, internal linking and overall site speed. It was a massive job. I hired several VA’s to help with repetitive work (long story, but there was some serious repetitive work that would have taken me over a year to do on my own).
This restructuring took up much of 2017.
Temporary hit on ad revenue
During the site overhaul, I more or less ignored ad revenue. I had ads on the site and it earned, but I didn’t put much time into it. Revenue per 1,000 visitors was pretty low. I wanted to get my house in order first… set the stage for organic traffic growth first. I figured once traffic started growing, I could then optimize ad and affiliate revenue.
On-Site SEO to the Next Level
As I published reams of all types of content and tightened up the site, I monitored results. After 8 months, results started coming in. From there I further analyzed what was working and decided to take on-site SEO to the next level.
My focus for on-site SEO was better image optimization (it’s an image-rich site) and publishing insanely good content. I know I sound like a Google sycophant here, but results didn’t lie. My best performing content was my best content.
I hired a brilliant graphic designer to create custom graphics for much of my content. This not only proved to be popular on Pinterest and with readers, but it also attracts links.
I made content as good as I could make it with what I call content enhancers (using only those that made sense for the topic).
I published extensive article series that were interlinked and exhaustively covered topics.
Throughout the process, I came up with hundreds of long tail topics to cover and to this day order piles of content monthly. My list of long tail grows faster than I can cover it. This is due to the fact that results are pouring in so fast with all the changes that I now know with almost certainty, what works and what doesn’t. I continually get more ideas weekly based on what’s working.
My keyword research metrics
You’re probably wondering what kind of keyword metrics I look for. This might be surprising, but I go for fairly low search volume as long as the Ahrefs keyword difficulty is low (preferably 0, but up to 5 is acceptable).
For example, 50 searches a month with a keyword difficulty score of 0 is fine with me as the main keyword for an article.
I’ll go as low as 10 monthly searches.
The fact is with long form content, you’ll naturally target many more keywords so the reality is if the article is good and ranks, it’ll rank for many long tails.
Of course, I also found many very sweet keywords with 1,000+ monthly searches with an Ahrefs keyword difficulty score of 0. These are sweet. I dig for them weekly.
Affiliate links, affiliate links and more affiliate links
While I don’t focus much on buyer intent content (reviews, comparisons, best-of articles), I do publish content that where affiliate links are applicable. I insert many of them. While the affiliate ROI isn’t awesome, over time, I’ve nearly doubled my affiliate revenue by incorporating many affiliate links in long-form content.
I want to make it clear most of my content is more informative than it pre-sells so conversion rate is low. But, the extensive, long-form content pulls in plenty of traffic and so due to volume of affiliate clicks, commissions roll in. I still have a long way to go with the affiliate revenue, but it’s on the rise, which is all I care about at this point.
2 serious hiccups along the way
I encountered 2 major hiccups along the way that I thought were site-busters for me.
First, sometime in 2016 my niche site was hacked. I still don’t know for sure what happened, but at some point Google deindexed my site for malware. What a nightmare that was. Miraculously I was able to clean it up and get it indexed after several weeks.
Second, I tested a new theme on my site in mid-2017 as part of my restructuring. That theme did something very odd resulting in thousands of not found URLs in Search Console. This wreaked havoc with my technical on-site SEO. Organic traffic plummeted. It was bizarre. After trying everything to fix it, I decided to switch back to a previous theme. Within weeks all problems resolved and organic traffic returned. Again, I have no idea what happened.
- Organic search traffic: Doubled since site restructuring was completed (end of 2017).
- Pinterest traffic: A very slight bump; overall pretty disappointing so far given effort put in to improve it. It’s still a great traffic source, but I’ve not enjoyed a massive spike I had hoped to get.
- Facebook traffic: Nada. Organic Facebook traffic is bad.
- Ad revenue: More than doubled (I’m back to putting a lot of time into ad optimization now that the site is spruced up nicely).
- Affiliate revenue: Nearly doubled (I’d say it’s 1.6 times what it was before the site restructuring).
- Page views per visitor: More than doubled.
Current Trend: Traffic grows weekly. My huge investment in restructuring, new content and improving old content is paying off big time.
In due course, I’ll update income reports to illustrate these timeline of events. For most of 2017 I focused solely on enhancing the site that I pretty much ignored Fat Stacks (plus I launched another niche site, which is slowly growing).
At this point it’s rinse and repeat which involves two processes:
- Publish loads of new content targeting long tail keywords; and
- Continually improving content quality (new and existing).
For example, this past weekend my graphics guy delivered a new set of graphics for an existing post that ranks #1 for some great keywords. He spent over 50 hours on these graphics. While the original article was good, these additional graphics (39 of them) will make it even better.
What about social media?
I’m putting a great deal of effort into Pinterest with mixed results. Pinterest traffic is up, but not growing as fast as I’d like given the effort. I’ll stay the course, but I’m hoping to hone the process so it’s not so labor intensive as it is now. Due to less than stellar results, I don’t have much to report on with respect to successful Pinterest strategies. I hope this changes shortly.
I’m also hoping to put more time into Flipboard. I think Flipboard has some real promise as a traffic source. It takes effort, but with over 100 million mobile users, it’s a viable platform for traffic. Flipboard is very brand and media friendly.
Other than that, I kick a bit of content around on Facebook, Twitter, Tumblr and G+, but am not putting any serious time into it. I think LinkedIn is great for the business crowd (not that I’m adept at using LinkedIn whatsoever).
Am I using paid traffic?
I do buy a bit of traffic here and there, but not for ad arbitrage purposes. It’s more for promotion to get fast traffic for promotional purposes.
I buy occasionally from Facebook mostly. It’s not much, but a bit here and there.
If I get the organic Pinterest process improved, I may promote some pins.
Will I do ad arb again?
Yes, if it works. I won’t disregard organic search though. Organic search will remain a focus for now, but if ad arb opportunities arise, I’ll jump all over it. While running dozens of ad campaigns is as boring as it gets, profits can be fast and substantial (worth the tedious, mind-numbing work).
I suspect at some point ad arb will work again. It may be with an ad source other than Facebook. While I’m not actively testing many traffic sources, I pay a bit of attention to paid traffic opportunities.
What about e-commerce?
I’ve resisted e-commerce for years. It’s a possibility, but not one I’m all that interested in. It’s a lot of work, but can also pay off huge. I’m currently not interested in e-commerce arbitrage (buy from Aliexpress and sell with huge mark-up on my site or give away with high shipping fees where shipping fees are the profits). While there are big profits there, I think it’s harder than it appears. I don’t need the distraction right now.
I’m mindful of the e-commerce potential, but for now I have a really good thing going – publish lots of awesome long tail content. It’s a model that I’m good at and enjoy. What more could I ask for?
Do I miss ad arb?
It’s a moot question given ad arb isn’t really viable these days. It’s possible, but it’s very difficult. I prefer focusing on building up organic search and Pinterest traffic.
Short answer: yes and no.
The profits were great and fairly easy, but it takes daily management given lots of money is spent. In fact, now that I have systems in place for organic growth, I spend less time on my sites now than I did during ad arb days.
Moreover, ad arb sites aren’t really a saleable asset. Sure, you can sell them, but most site buyers prefer sites with passive traffic – organic search and/or steady Pinterest traffic.
Sites with organic search traffic are much more valuable because of its passive nature.
Ideally, I’d be able to do ad arb and build up organic search traffic. I did that to some degree back in the day, but most of my time centered on buying traffic.
Who knows, maybe more ad arb opportunities will arise in the future.
In the meantime, I’m very happy with growing organic traffic sites that are earning very well and that require less time to manage.
Find a process that works for you. Experiment. Throw tons of stuff against the wall, but once something works, master it and scale.
I did that with ad arb when it was a viable strategy. I wish I had bought more traffic than I did.
These days my core focus is publishing loads of outstanding content targeting long tail keywords with little competition. My secondary focus, which is still significant, is improving existing content.
My point is not that you should follow my strategy. My point is find something that works for you. Master and scale it.
Jon runs the place around here. He pontificates about launching and growing online publishing businesses, aka blogs that make a few bucks. His pride and joy is the email newsletter he publishes.
Hyperbole? Maybe, but go check it out to see what some readers say.
In all seriousness, Jon is the founder and owner of a digital media company that publishes a variety of web properties visited and beloved by millions of readers monthly. Fatstacks is where he shares a glimpse into his digital publishing business.