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What is search arbitrage, how does it make money?

What is search arbitrage and how does it make money?
Search arbitrage became a hot topic and a way to make money around 2019. It generates millions of dollars in revenue for marketers and search companies as well.

In this article we will cover what is search arbitrage in its various forms of S2S, N2S, and D2S. In addition, we will tell you how to get started.

Definition of arbitrage:
Arbitrage is an investment strategy that involves simultaneously buying and selling the same or similar asset in different markets. The goal is to profit from small differences in the asset's listed price.

Now let’s put this in the frame of the search business.

Definition of search arbitrage:
Search arbitrage is an online marketing strategy that involves buying traffic from one source at a lower cost and redirecting it to another destination where it can be monetized at a higher rate. In the case of search marketing, it would be buying traffic from a cheaper search engine and sending traffic to a more expensive search engine (like Google), or to a page full of content and ads.

The ad click on the cheaper search engine may cost for example, $0.25 per click, but when the user lands on Google and clicks on it, the same ad there if clicked will cost the Google advertisers $0.75, in this case the marketer who bought the initial ad click for $0.25, but achieved a click on Google for $0.75, makes at $0.50 profit in between. Now imagine doing this 1000 times in a day or 10,000 times. One can make a healthy profit with search arbitrage.

Different forms of search arbitrage:
1) Search to search (S2S) - an ad is placed on a search engine which charges lower for an ad click such as “Lawyers in Los Angeles”, and the ads click leads to Google, where the ads shown for this query could be of higher value.

2) Display to search (D2S) - is the marketing strategy of buying traffic on display ads that can be bought on various advertising networks or DSPs like Google, and then sending the user to a search page with a pre-set query loaded up. The hope is that the user will click on the ad displayed on the search engine, which will earn the marketers more money than the cost of the display ad click.

3) Native to search (N2S) - this is the marketing strategy of buying traffic on native ads from native ad networks like Taboola which display native looking ads on websites, and sending that user to a search page with search ads, clicks on the ads generate revenue.

4) Social to search (S2S) - similar to N2S, its the practice of placing ad buys or naturally placing links with social media content. The click on the ads will send the user to a search page with search ads, clicks on the ads generate revenue.

Is search arbitrage good for advertisers?
The pro is that advertisers buying ads in networks like Google, will see their ads appear on SERP (search engine results page), and on its partner display publisher network. So advertisers are able to get more exposure to audiences outside of their direct search page.

Another benefit is that advertisers with expensive keywords will see more traffic to their ads due to search arbitrage markers driving traffic to their ads.

The cons is that the end-user may not always intentionally click on the ad with an intention to engage since the publisher may have displayed an ad that isn’t relevant or is a click-bait. But this is usually a rare instance as the company providing the publisher the search feed for their arbitrage activity can track the click to earnings performance and overall quality score using which they will assess the quality of the publisher's traffic. Lower quality marketing strategies will result in lower yield.

How much money does search arbitrage make?
Search arbitrage income runs a profit margin of 7-15%. So if you are spending $10,000 a month in media buying, expect to see a profit ranging from $700 - $1500. This may not sound like a lot of money, but for many marketers sitting in countries with low cost of living, $1500 is a significant amount of cash.

For companies seriously invested into search arbitrage, we’ve seen spending over $20,000 per day, this equates to $600K per month and profit of $90K.

🚀 Ready to get started in search arbitrage? Contact the Big Engage Marketing team to get all the information you need and get started. 

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