REVISITING AFFILIATE ARBITRAGE: in one year, it will be stronger than ever

While I thought affiliate arbitrage would take a hard hit as a result of Google’s new policy, that does not seem to be the case. Affiliate arbitrage is morphing because merchants are building landing pages for affiliates and affiliates are building their own pages. And honestly, isn’t this still arbitrage which is basically “buy low, sell high“? What else would you call this?

Here is the even more interesting part. Since, affiliates have landing pages, not only can they bid in Google, but they can also bid in Overture — opps, meant Yahoo — which means arbitrage sales might increase.

This coupled with the fact one should never underestimate the entrepreneurial sprit of affiliates, what do you think will happen?

One year from now, arbitrage could be much larger than it ever was before Google’s new rule.


I have always taken the view that affiliate arbitrage is OK, but, it’s not the best Google user experience. I had mixed feelings on the whole subject to be honest because of the user experience and never recruited affiliate arbitragers. There was other low hanging fruit.

After a few beers and an interesting, challenging, and engaging conversation with SEM super-star, affiliate Adam Viener last week at Search Engine Strategies, I found much more value in arbitrage.

Bottom line, 100 smart affiliates paid on commission can out perform two search managers working for a merchant. It’s just a matter of numbers. 100 people are craftier than two. In addition, in general, the more links on the search engine results page (SERP) for a merchant, the greater the sales for the merchant.

I knew this before, but my new role at Audible really drove this home since I was thinking about all paid acquisition channels — affiliates, search and online and offline advertising.

My job is straightforward: drive as many new customers through the door for the lowest possible cost in order to turn a profit for the shareholders. To me, search, affiliates, and online paid media are really one channel. It’s a Venn diagram of three overlapping circle.


Venn.bmp

A good online marketing director understands these channels are interconnected and need to be managed as one. If there is a cost saving to move sales from search to affiliates or vise versa, then it makes sense to do so.

This is an ROI move for a merchant. For some merchants, it clearly does not work for affiliates to arbitrage at all, but for many merchants there is a soaring return. Also, there is a brand damage issue, I admit, so the merchant must way the pros and cons of allowing affiliates to dominate the SERP.

If arbitrage increases sales and lowers acquisition costs, why should a marketing director not embrace affiliate arbitrage? The answer would be the Google search experience, but honestly, my job is to maximum revenue, not leave sales on the table. (And arbitrage is not spyware, malware, or some other evil that I think crosses the ethical line.)

Given the value to merchants and affiliates creativity, arbitrage is far from dead, it will continue to grow and I bet more and more merchants will find value in it.

I know some of my colleagues on ReveNews are shaking their heads at me now, thinking I’ve gone over to the dark side, but, let me point out to those colleagues, no matter how Adam tried, he did not change my mind on domain squatting, though he had some interesting arguments.

About Beth Kirsch

You can find Beth on Twitter @bethkirsch

  • http://www.theaffiliateguy.com Paul Colligan

    And, … don’t forget Beth …

    Affiliates with an effective arbitrage strategy are also collecting email addresses in the process. The smart ones, very soon, will have a list to leverage – in addition to the traffic they purchased.

    It’s only going to get better for the affiliates. Google forced them to stop goofing around.

  • Keith Kochberg

    Beth,

    Great job. I particularly like the clear way you illustrate the cross channel perspective of a merchant. Congrats on your success at Audible.

    Sincerely,

    Keith Kochberg

  • http://NoCookie Beth Kirsch

    Paul,

    You might be right, we’ll see what happens. My experince has been that abitragers don’t like to build landing pages, so we’ll see how they feel about lists.

    Keith,

    Thanks for the kind words.

    Cheers,

    Beth

  • http://profitrank.com Jason G. Williscroft

    This is good stuff! My company operates in the intersection between the Search & Affiliate spaces, and one of the fears we constantly have to address with our clients is that affiliate attempts at arbitrage will damage their own Sponsored Search efforts.

    We’re a couple of years farther on here, so I’ll take the liberty of offering our economic analysis of the practice. In brief, though, we’re in favor!

    As you say, it’s not surprising that 100 affiliates might be able to accomplish collectively more than an in-house staff of two. Beyond simply tolerating the practice, we push our clients to encourage affiliate arbitrage actively and to support it in any way they can!