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Friday, April 13, 2007

Admitted: "We Do Arbitrage"

At Search Engine Strategies New York this week I had the opportunity to model a panel on the latest with buying contextual ads with particular focus on the top contextual programs through Google, Yahoo, IndustryBrains, and a couple of others.

One of the most fascinating was by a major cable television network that uses low-cost, broadly-based terms to drive traffic keying on all kinds of current pop culture related content. It's an actively managed campaign that requires constant innovation to stay ahead of the curve. What's so interesting about it is how cost-effective this is as a way of generating buzz, if you get the tone right. It's basically using online media to deflect user attention back into the media vortex, in a subtle manner.

The two main economic benefits stated by the panelist were:

* Low-cost awareness-building for their flagship hit programs;

* Traffic arbitrage, sometimes breaking even or better on the ad inventory they show on their own sites.

Let me repeat that again. In a world where we've suddenly been conditioned to believe that PPC arbitrage is wrong, this marketing executive unabashedly admitting to doing it.

This paralleled my own presentation the same week, on how Google currently measures site and landing page quality. In short, I wanted to make clear that you could technically call a lot of the media companies advertising on Google "arbitragers," because they know the rough CPC's and effective CPM's on their ad campaign with Google, and they know the rough payback on an impression basis from their already sold inventory. So in fact the distinction is not a literal one, where you point a finger at someone making a profit on a media buy/sell and call it evil; rather, Google's quality scoring formula aims to disincentivize certain advertisers from offering deceptive or particularly annoying user experiences as defined by user input and user behavior. In an upcoming column I'll look more at the distinctions between "arbitrage," "nearbitrage," and "garbitrage."

In short, to have an exec admitting to arbitrage is not scandalous. If they have advertising on their site, and are buying ads to drive to that site, anyone could have figured it out anyway. That's what they're doing. As a bonus, they get cheap promotion for their TV lineup. And some publishers get paid too. Win-win-win.

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Posted by Andrew Goodman




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