How to Keep Pay-Per-Click Fees Down

Pay-per-click arbitrage could be driving up the cost of your keywords.
Magazine Contributor
2 min read

This story appears in the January 2007 issue of Entrepreneur. Subscribe »

In business, arbitrage means taking advantage of a pricing imbalance between markets. It's become a popular--and controversial--practice in search engine advertising.

Generally speaking, pay-per-click arbitrage refers to buying clicks at a low price and making a profit by selling clicks at a higher price. For some arbi-trageurs, it's an easy profit. Yet for business owners who are PPC advertisers, arbitrageurs cause click fees to increase.

Let's look at one way arbitrage works. You could make money by hosting ads on your business site or blog. Google AdSense and Yahoo! Publisher Network are two popular ad publishing programs.

Once you sign up, you'll put the assigned code into your web pages. Relevant ads will appear on these pages. You get commission for clicks on those ads from the search engines, who in turn collect ad fees from PPC advertisers. Arbitrageurs become PPC advertisers to drive clicks to their ads.

Here's where the controversy heats up. Some arbitrageurs don't offer any content on their pages other than the PPC ads. Many marketers argue this is a poor user experience. And although the search engines stress the importance of quality content, "ads-only" arbitrageurs are being allowed to do this.

As a PPC advertiser, your click fees could increase if arbitrageurs start bidding on your keywords. More competitors usually means higher click fees.

Watch your keywords carefully. If arbitrageurs jump in, consider changing your ad copy to show that your company actually offers the product or service you're advertising, which should persuade consumers to click your ads instead. And if you spot arbitrageurs that you feel are creating a poor user experience, complain to your PPC account representative or use the search engines' feedback forms.

PPC arbitrage is a moneymaking tactic for ad publishers, but it can inflate advertisers' click fees, create a poor user experience and ultimately reduce the effectiveness of PPC advertising.

Catherine Seda is an internet and search marketing expert. She's also a dean of LA College International. Get her "Top 10 Internet Marketing Mistakes" report atwww.catherineseda.com.

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