What is Ad Arbitrage?

Updated: April 23st, 2020



What Is Traffic Arbitrage?

If you’ve taken a basic economics course at some point in your life, the word “arbitrage” is one you’re probably familiar with. Even without that familiarity, however, you can get a good idea of what arbitrage entails by turning to the classic stock market adage: “Buy low, sell high.” And, in a sense, it really is that easy: arbitrage is just the process of buying something for cheap and taking it somewhere else to sell it at a higher price. The difference in price goes straight into your pocket.

This way of turning a profit is what makes the world go ‘round – from your local grocery store to multi-million dollar corporations. Advertising and traffic arbitrage operate on the same principle. You buy visits or clicks from an ad network that offers low prices (e.g., Taboola), then sell it to another platform at a higher cost to generate revenue or make money when people view or click on your display ads.

Whether they got there from advertising or not, every website visitor has their price. This “price per visitor” metric is vital to all spending related to a website. Traffic arbitrage, then, is a business model with price per visitor as its own sort of currency. You pay the network a certain amount per visit, then “sell” your site’s visitors to your advertisers at a higher price – netting you some profit in the process.



Introduction

Despite the rapidly-growing nature of traffic arbitrage as a business, few to no exhaustive resources on the subject have been made readily available. When site owners and network representatives have to scavenge for knowledge, the end result is tragic: owners losing money on a daily basis and representatives failing to live up to their paycheck.

Let this article, then, be your roadmap. Everything you need to know to get a foothold in the arbitrage business is right here. This article starts with the foundations and covers the most important steps, but this article will be constantly updated to provide even more information – so if there’s anything you’d like to see that hasn’t been covered yet, please drop us a line!

If you’re skeptical that something like this could net you much profit, you’re not alone – three years ago, we were too. We started as an experiment to see if there really was something to traffic arbitrage; now, it’s our main business. Let this transformation from a team with little experience or understanding into one of full-fledged experts show you that you can be your own boss, too. We’ve seen it all: thousands of network representatives, dozens of advertising networks and traffic providers, and every kind of sticky situation you can think of. So if you’re looking for the do’s and don’ts to avoiding underwater stones, look no further; let our experience guide you.



What To Know

Traffic arbitrage is a great way to upsize your earnings. In some cases, it can start paying more than your current job! In a business where you’re your own boss and you don’t have to sit in an office from 9 to 5, it can be easy to get ahead of yourself. Before you get started, there are some important things to know:

Outside of Saturday morning cartoons, there’s no such thing as getting rich quick. Like any significant way of earning money, arbitrage requires you to invest some time. It’s a business where you can start to generate income while you’re sleeping or spending time with loved ones, but to get there you have to put in the effort to get off the ground.

Money, too, will give you a good boost in the right direction. Similarly, it’s worth noting that your paycheck won’t be coming in every week or two like you might be used to. Most networks have payment conditions that follow the NET30, 45, 60, or 90 model, meaning your payment will come in anywhere from 30-90 days after the end of the month. When you run your own ad network you will be able to receive ad revenue instantly.

All this being said, don’t be discouraged! Anything that promises money without asking for anything in return is likely a scam. So long as you’re willing to put in some time and effort, like you would with any other skill, there’s nothing stopping you from becoming an expert in traffic arbitrage.



Getting Started

So now you’re fired up about getting into the traffic arbitrage business. That’s great! But where should you start?

If that question hit you right off the bat, don’t worry – that’s what we’re here for. First things first, take a look at this list for an idea of what you’ll need to get started:

  • Website
  • Domain
  • Hosting
  • Content
  • Traffic
  • Time to research and join ad networks
  • DFP skills or a budget to hire a professional
  • An understanding of statistics to increase ROI (Return on Investment)

With this overview in mind, we can start to delve into the details of how to really get the most out of traffic arbitrage.



Website

A solid website is essential to being successful in traffic arbitrage. But what makes a website stand out? To get the best foundation for your foray into the arbitrage business, you’ll want to follow these steps.



Choose A Niche

What’s your website about? What categories does it fall into? How would you describe it over other conversations at a dinner party? Getting a good idea of this right off the bat is important – not just for you, but for your ad network.

Choosing a solid niche (also known as a vertical) is vital to achieving success in the ad arbitrage business. While buying traffic is a viable option, you’re going to want to aim for as much organic traffic as possible, for the sake of both potential ad networks and your wallet. To do this, you’re going to want to make sure your site attracts a decent amount of people.

The best way to do this is to choose a broad niche – something that people are likely to go searching for online. If you choose something that a wide range of people are already interested in, you’ll be much more likely to attract new visitors. Not only that, but those visitors are more likely to stay on the site for longer periods of time, to come back later on, and to recommend the website to friends. Think about it this way: more people are likely to go looking for websites about fashion, fitness, or relationship advice than a website about learning Congolese in Brooklyn. Since more traffic means more chance to advertise, websites built on broad niches like the first three are more attractive to advertisers.

A word to the wise: not all broad niches are created equal. If there are potential legal or moral restrictions, as with drugs, gambling, or adult sites, ad networks will be less attracted to them. That said, if your heart is set on one of those, it is’t game over. There are always specific ad networks that specialize in niches like the ones mentioned or it requires you to create your own.



CMS and Hosting

Before you can start building your site (or ordering it, if web design isn’t your thing), you’re going to have to choose a Content Management System (CMS). CMSs are applications that let you put content out onto web and manage it accordingly, all in a user-friendly fashion. It’s important to make sure you’re able to operate your site when it’s ready – how to make new posts, add images, make edits, etc. You should also make sure you familiarize yourself with how to manage ad tags, as well as applying Search Engine Optimization, which is increasingly important to getting traffic nowadays.

Though there are tons of CMSs around, we strongly recommend using WordPress, especially if your budget is slim (or non-existent). A household name for plenty of content creators, WordPress is a completely free platform built specifically for blogging. As such, it’s highly intuitive, meaning you can learn to manage your site without any coding skills. If you want someone else to manage it for you, there’s no shortage of people who specialize in WordPress, so you won’t have to break the bank hiring a programmer with a special skillset. And when it comes to hosting, most companies already have WordPress hosting, meaning you’ll get it with WordPress already installed.



Choose A Theme

We all may learn to not judge a book by its cover, but a pleasing website appearance is an immediate indicator that the people running it are competent. If a website is clean and user-friendly at first glance, visitors will be much more open-minded when reviewing the actual content. It’s not just visitors, either. When you apply to join ad networks as a content publisher, your site will be evaluated by network representatives. Since sites that look old, sites overloaded with ads/images, and sites with errors or high load times are likely to be rejected regardless of traffic volume, you want it to look nice!

A crucial part of choosing a theme is its load speed. The faster a site loads, the better experience you’re giving any visitors. The longer time a site takes to load, the more likely people are to get frustrated and click out before the next page opens, losing you visitors and profits – as well as Search Engine Optimization rank. Since any ads you have will also increase load time, it’s especially important to make sure as little load time goes to the theme as possible.

On the tech side of things, you want to choose a theme that fits your niche, as well as what type of content you’ll be posting (text-heavy, image-heavy, etc.). You can start from scratch, but make sure you know what you’re doing! You’ll need to know how many pixels there are in your right rail, where you can insert a video or slider ad, etc. If you’re less than confident in your coding knowledge, it’s probably a better idea to choose a theme with pre-made ad widgets. While it isn’t too difficult to learn the coding side of things, you’ll want to know for sure that your tags are inserted correctly, as any misstep on this end can negatively impact your profits.



Layout

A good layout is key to giving your users a good experience – and to effectively using ads. Keep in mind that you want your ads to be visible, but not so overwhelming that users will leave the site. Having an idea of what type of ads you’re likely to have your site will help strike this balance; this way, you can cater them to your users.

With this in mind, it’s ideal to have at least one banner on your site’s homepage that’s visible before scrolling down at all. Upon scrolling, most themes have a right (or left) rail for widgets and ads. However, if you have an image or gallery theme for your site, it’s a good idea to consider pagination. This will ensure more page views, and thus ad impressions. For sites that make heavy use of articles or other word-heavy content, a good strategy is to insert banners within posts. This will ensure that readers see them while reading through content.

A good rule of thumb is to have between three and six standard banners per page, which best practices show to be the most effective.



Content

It may seem obvious, but having good content with which to fill your site is a great way to ensure people not only come to your site, but stay there for longer. Unfortunately, the age of the Internet guarantees that high-quality content is being published every second – something that’s great for consumers, but less so for content creators vying for site visits. The best way to navigate this is by ensuring your content is unique. Even overcrowded niches like fashion have a vast range of topics on which to write. Making sure your site is full of unique content will ease some of the strain that comes from things like overcrowded niches, quality competition, so on and so forth.

On that note, remember not to steal or copy any content from elsewhere. Not only is it generally in bad faith re: your users (and whoever originally created that content), but the terms of service for most ad networks require that your site has content that’s 100% original. If you can’t write or have other content creation struggles, we recommend looking into hiring a professional writer. There are thousands of freelance writers who can write good material, with prices in many markets going as low as $5.

 


Analytics

When your site is up and running, installing and frequently checking analytics is one of the most important things you can do. There are plenty of tools to help you do this, all of which offer interesting features. Some, for example, allow you to video record visits on your site; others provide you with a heat map. Regardless of what tools you choose to use, remember that they’re a great glimpse into the behavior of your users. Let this behavior guide you to make improvements that will increase not only your site’s quality, but your monetization.

The most common service for analytics is the highly-recommended Google Analytics, which boasts an impressive range of tools. You can see where your visits are coming from, what pages people browse on your site upon getting there, what pages they leave your site on, so on and so forth. Regardless of what range of analytics tools you choose to employ, however, keep in mind how important it is to understand how your site is functioning in terms of visitor usage.



Search Engine Optimization (SEO)

We know what you’re thinking. If we’re talking about arbitrage, why is SEO important in the first place?

But the goal of arbitrage is to make a profit, and a big one at that. Let’s say you spend $10 to get traffic to your site, then monetize it to make $30. That gives you a $20 profit. However, if you can get the same amount of traffic for free, you have a $30 profit, and if you invest the same $10, you’re boosted to a $40 profit.

If you want to maximize your profit, then, utilizing SEO is your best bet. Even in overcrowded niches, using the right keywords can boost your rank. Combining good and consistent SEO with high-quality content is something search engines are built to recognize, which will steadily increase the number of organic visitors your site receives. Whether you end up overtaking big-name sites or just getting boosted a couple of pages, traffic garnered organically from SEO is the best free traffic you can get.

When we launched our first site, we utilized SEO for every article. Today, just a few of those keywords pay back 80,000 visitors from organic searches – and that’s just a handful out of thousands. These stack up more and more every time new material is published online.



Types of Ads

Advertisements, like anything, come in many forms. When choosing which you’re going to use, it’s important to mind what makes them different. In general, each has a unique set of advantages, uses, and pay rates.


Standard Ads are, well, standard! These are the ads you’ll see on most sites. They come in a variety of sizes, allowing for high customizability on that end. Notably, however, the most popular pre-sets are 300x250, 160x600, and 728x90.

Native Ads are designed to look like a natural (or “native”) part of your site. Because the appearance is relatively nondescript, visitors are more likely to view them as an information coming directly from your site – making them more likely to click on them. As such, they usually appear below or within posts.

Pop-Up Banners appear immediately upon visiting a site, typically in a separate window or additional tab. These ads generally have a high CPM compared to others, but they also run the risk of making visitors annoyed or concerned about potential computer viruses. Mind the importance of maintaining a positive user experience when considering this type of ad.

Video Ads are videos within ad blocks. As with pop-up banners, video ads require you to examine the balance between high CPM and negative user experience. For example, ad networks dislike letting the ad automatically play on mute, but sudden noises are often jarring and annoying for site visitors. Similarly, this type of ad slows down loading speed a considerable amount.

In-Text or In-Image Ads are similar strains of the same base ad type, both with average CPM rates. The former appears when a user clicks highlighted/underlined key words within the text. In-image ads, then, are banners that appear on images within your site. Both of these ad types do impact site loading speed and appearance; however, the effect is not major. In most cases, you’re able to adjust them considerably to fit your site best.



Acquiring Traffic

So your site is up. Now what’s the best way to get traffic? There are a couple of different approaches you can take to this end, but there are three core ways of going about it that we recommend.



Organic Traffic

Getting your traffic organically, which comes from SEO, is bar-none the best way to get free traffic. In fact, ad networks prefer it when your traffic is generated via web searches, because it means you actually have what users need. Think about it this way: if you need self-help advice and go searching for it online, any website you click through to is likely to have what you’re looking for – self-help advice. As such, you’re more likely to spend time there, looking at content and, subsequently, advertisements. From the perspective of ad networks, relevant material greatly increases the chance of clicks/actions/sales.

That said, getting organic traffic requires you to optimize your site and its content, which can be a bit of a time-sink. Moreover, you never know how many people you’ll get, or when you’ll get them. You can make some solid predictions with regards to keywords and high-volume searches, but ultimately you don’t know how many people will actually click through to your website. Besides, if you don’t know much about SEO, you’ll probably have to pay significantly for SEO services to give you a hand.

Bottom line: SEO is important, especially in the long-term! But when it comes to arbitrage – especially if you’re starting from scratch – you’re going to need to use complementary methods to get your traffic levels up.



Buying Advertising

There are a few ways to go about advertising your website, but ultimately you do so with the goal of generating more traffic. Usually, you’ll be using advertising, social media sites like Facebook or Instagram, or Google (AdWords, etc.). The key here is to find a good balance between the quality and quantity of traffic versus the price of the advertisement.

Facebook and Google, for example, have high quality traffic, but can run a bit pricey. While it may cost you more, however, you’re likely to get more visitors, and those visitors in turn are more likely to spend time on and return to your site. Ad networks, on the other hand, are less expensive, but the traffic quality may suffer for it.



Buying Traffic

While buying advertising can certainly be effective, you’re also able to cut out the middleman an simply buy the traffic itself. There are plenty of companies who specialize in selling traffic, so it’s of little surprise that this is the cheapest way to get visits in a high volume. Like with buying ads, however, price and quality tend to have an inverse relationship. You may be paying just a dollar for 1000 visits, but the quality will reflect this.

It’s important to pay attention when working with companies that sell traffic. Most will sell either bots or a base of users acquired via spam e-mails, pop-ups, and other forced redirections. Usually, these visitors won’t ever see any advertisements for your site, and any glimpse they get of your site will likely be clouded by annoyance. Think about it – if you click on a site link for stock exchange but are somehow redirected to a site about making cupcakes, you’d probably immediately click out in irritation. If visitors aren’t staying on your website, they’re not seeing the ads you have there.

This isn’t to say traffic companies are bad. Just keep in mind that you may have some low performance – or, in extreme cases, be banned by your ad network – if you aren’t careful in using them.



Monetizing Traffic

And now you have traffic! But monetizing this is a whole new story. As with most businesses, you can predict some of your possible profit. For example, you may spend $10 on a traffic source and get 1000 visits. Your ad network of choice proposed $3 CPM, so now you wonder how you’re able to make a profit by paying $7 on buying rather than selling. The answer to this is simple. You can sell the same user to a number of companies at the same time. If you partner with many networks, you can sell to those with the highest payments first.

Arbitrage: Buy from A, sell to B

Traffic Arbitrage: Buy from A, sell to B, C, D, E, F, & G at the same time



How Does It Work?

The math here is simple. As mentioned in the layout section, you can have up to six banners per page. If one user gives you six banner impressions per page, 1,000 users will give you at least 6,000. Most quality traffic will result in an average of three page views or more per visitor, which brings that 6,000 up to 18,000.

Say you’re paid per 1,000 impressions. Given the previously mentioned $3 CPM, your 18,000 visitors will net you $54 (18 x 3 = 54). If your 1,000 visitors cost $10, that’s a profit of $44.

Of course, this process can be a bit trickier in execution. Take, for example, the concept of fill rate: how many ads are served based on total page impressions. Some ad networks may pay $7-$10 CPM, but have a low fill rate, while others may have $1 CPM (or lower), but have 100% fill rates.



Ad Server

To avoid the issue of low fill rate, you can use an ad server. This can maximize monetization – and, therefore, profit.

Say you’ve signed up with twelve networks. Due to loading times and user experience, though, you don’t want to overload your site with ads. Some of these twelve networks have average CPM and 100% fill, but you don’t want to lose other networks, which may have a higher CPM in return for lower fill. To mediate this, you can show twelve ads on six ad spaces and make sure to show the most expensive ones first. But how? An ad server can help! Using these, you can set up a “waterfall,” where you put networks with higher CPMs on top and those with lower CPMs below.

While you have no shortage of options for good ad servers, we prefer to use DFP (DoubleClick for Publishers for Small Business) on our sites. It’s free, it does its job, and it’s made by Google. When you open up an account, you collect tags provided by ad networks and insert them into your DFP account, along with the appropriate CPM details. As a result, a visitor to your site will be processed by DFP according to your settings, thus showing a specific ad. Not only will you maximize your revenue, you also won’t be losing any impressions.



Traffic Filters

When you use a traffic filter, you (or rather, the filter) will be evaluating site visitors and separating them based on whatever criteria you specify. Usually, these are used to lower fraud activity on your site by banning users with activity. If a user makes too many clicks on banners or browses too much too quickly, for example, the filter can block them from interacting with ads. Similarly, it can filter sources that are known to provide bots or low quality traffic.

Unfortunately, these don’t come cheap. Prices vary from company to company, but among the most well-known are Forensic, Moat, DoubleVerify, and Integral Ad Science. Most filters are good, so you’ll be better off looking for small differences in function and which companies work longer than others.

Price notwithstanding, it’s vital to have a traffic filter. Not only does it lower said fraudulent activity, it can also provide you with some information about your traffic, which is always good to have on hand to provide to advertisers. You’ll also be getting a look into defining good and bad sources of traffic – especially if you’re paying for traffic from multiple sources.

Ultimately, even when using reputable sources like Facebook or Google, you never know who’s going to click your ad and how they’ll interact with your site upon doing so. If you’re really set on not using a filter, look into buying from a network that self pre-filtered traffic. While it’s ideal to have your own, this will at least put your traffic through some screening. (That said, buying pre-filtered traffic and having your own filter means you’ll have double filtration – even less of a chance of fraud!)



Ad Networks

You may remember from the Choose A Theme section that applications for ad networks usually involve a representative coming to evaluate your site. When they do so, in addition for making sure your site is running smoothly, they also have in mind certain requirements – usually with regards to traffic volume and specific geos.

When you’re approved by the network, you’re provided with a tag (usually in JavaScript code) that you can insert into your site. Then, when your site gets a new visitor, the tag triggers a specific ad from the network. As for ad content, it can be anything, so long as the ad network is partnered with the original advertiser.



Which Ad Network Should I Join?

We get this question a lot: “What’s the best ad network?” First and foremost, let’s bust the myth that there’s a premium network that everyone wants to join out there offering the highest payout. There’s no best or worst ad network; there’s no network that pays you top dollar just for signing up with them. Instead, it’s about finding the network that fits best with your site.

So what does that mean? Let’s talk first about how ad networks work. Ad networks are companies that act as a middleman between advertisers and publishers. Advertisers want to acquire traffic (whether to make a sale, complete an action, etc.), while publishers are site owners with traffic on their site. Ad networks, then, connect both parties. The difference in networks doesn’t lie in function, but rather in the advertisers they have on board. Some have thousands, others have hundreds, so on and so forth. Each advertiser is different – different niches, requirements, budgets, etc. Given that different sites may have different requirements or simply use different advertisers, the same network will show different results on depending on the site.

There is, however, such thing as a bad network: the ones that don’t pay. These are scam companies, and sadly, there are a lot of them. The way these scams operate is by using your traffic and showing earnings in your dashboard, but ultimately never paying out. All the monetization goes straight to them. Fortunately, companies like this aren’t too difficult to scope out. If a network has had any issues not paying its users, you’ll be able to tell from a quick Google search. Before starting with a network, do some research! Look into reviews or get in touch with users (current or former) for advice.

To find the best network-set for you and your site, your best bet is to try joining a few at a time. Run them on your site for a short period of time, and after you’ve gotten a feel for them, you’ll be able to make a more educated decision. Not all networks will give you the best offer right away; most of them want to ensure that your site (and your traffic) is legit. Giving them some time will not only make you a more educated consumer, but it’ll also make them more comfortable making a solid offer.

In doing this, try to mix networks based on what types of ads they’re providing. For example, Network A may provide display ads, Network B may provide native ads, and Network C may provide video ads. Combine these together and scale your monetization.

A significant benefit to joining an ad network is that you have an account representative. If you have any concerns, questions, or just want to chat about your site and/or monetization process, you can usually contact them via Skype. You can negotiate NET terms and CPM rates with your representative. Notably, it’s important to build relationships within networks. Remember: if you’re making money, they’re making money, so it’s better to be friends!



Increasing Return of Investment

The point of a business is to turn a profit, and traffic arbitrage is no exception. That said, profit is a slippery thing; it can leak out into other venues on its way to your pocket. To ensure you’re getting the maximum revenue from your business, it’s best to get a good understanding of your ROI, including what steps you can take to increase it.



Study Your Statistics

First things first: compare your analytics statistics to statistics from your traffic provider and ad networks. Acquired traffic isn’t always seen by analytics programs, including Google Analytics; if you see a difference, ask your traffic provider about why there might be a discrepancy. It could be a simple software malfunction from your analytics program, but it also could mean an issue with traffic quality that wasn’t monetized.



Check Your Rates

Rates like CPM are constantly in flux, so you want to check them often. When networks promise $3 CPM, you can end up with $0.25 or $7. If things fluctuate out of your favor, you need to make changes accordingly.



Study Visitor Behavior

Keep an eye on how your site’s visitors act. How do they browse your site? What pages to they leave off on? Where do they spend the most time? If you’re familiar with this, you can adjust your ads differently on each page. For example, viral sites tend to use ads only on internal pages, with no banner at all on the main/home page. On pages that visitors tend to exit, you may insert an Exit banner.



Use Additional Tools

In addition to analytics, there’s an abundance of tools out there to help you study what’s going on on your site. For example, heatmaps can help you visualize aggregated user experiences, while some video recorders can record full visits. Tools like these – as well as others out there – can help you understand what users like about the website, as well as what should be changed.