What is Ad Arbitrage?
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.
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 ad 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 $40 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).
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 that’s “the best blogging email newsletter around.”
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.