Paid Search Arbitrage – Who is it Really Benefiting?

Posted on February 3, 2014 by Dan Monarko

Search Arbitrage is the practice of purchasing a keyword on one search engine (i.e. Google) while directing the person searching to another engine (i.e. Ask.com, about.com, info.com) for the same or similar more expensive term and profiting from the price discrepancy. In layman’s terms these “search engines” are paying for a click to get a click and earning a profit from the difference.

Don’t Be Evil

It is well known that Google was founded on the tagline “Don’t be Evil” and this mantra can still be seen on the philosophy page of its company site today. Bullet number six states “You can make money without doing evil.” Yes! You can absolutely make money without being evil and most of the time Google is offering a very valuable service when it comes to Google Adwords. Heck, Google Adwords is the basis for the career I have today and I could not be more grateful for it. However, when it comes to the practice of Search Arbitrage and turning a blind eye to it, Google is simply reaping the spoils from more than one angle while sticking it to the businesses that continually push Google’s stock prices up and to the right.

How Search Arbitrage Works

Below are a few examples of how these ads appear for a search on the term “water heater information”.

waterheater.png

Clicking on the Ask.com listing then takes you to the Ask.com search engine for the term “Water Heater Prices.” Ask.com serves mostly paid ads above the fold. In 2008 Google made an effort to clean up this practice, but after reports of low adsense revenues the following year, the company allowed this practice to creep back in without thinking about the advertisers that would be affected.

askAds.png

How We Protected Our Client’s Branded Terms

Articles about Search Arbitrage date back as far as 2006. However, I have never seen it affect a client’s search campaigns until recently. Sites like Ask.com, webcrawler.com and about.com were buying our client’s branded terms and using their branded name in the headlines. They would then redirect the search to a related more expensive one, which brought them to a property that served Google Partner Network search ads for the more expensive term. Sounds legit, right? Yeah not really.

For example, let’s say our client was Nike. (Nike: We know you are not a client, but if you want to become one you can find my contact info below!). It costs Nike $0.15 to bid on their branded term and an Ask.com listing with the headline “Nike Shoes” is in position 2. Ask.com takes the person searching to the Ask.com search engine for the search term “Nike shoes,” which broad matches everyone bidding on the term “shoes”. You can quickly see how a $0.10 click can result in a $7.00+ click on a broad match for “shoes” on Ask.com.

We processed our client’s trademark complaint by each individually branded keyword to get these sites to stop using our client’s branded terms in their ad copy. Over the next three weeks Google eventually stopped these search engines from using our client’s branded terms. In theory, the branded terms should now be safe. Third party search engines cannot use the branded search terms in their headline copy anymore.

The chart below shows how our client’s branded CPCs increase by over 100% when Ask.com and others started their Search Arbitrage efforts. Once Google finally stopped these engines from using our client’s branded terms, CPCs returned to normal.
 

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Below are three of the most obvious effects of Search Arbitrage and who benefits from it.

  1. Increased CPCs across branded and non-branded terms (Ding, Ding, Ding. Winner = Google).
  2. Increased listing on inexpensive search terms (Ding, Ding, Ding. Winner = Google).
  3. Serving more expensive ads on third party search engines. (Ding, Ding, Ding. Winner = Google and third party engines).

Google Wins the Search Arbitrage Game

For those keeping score at home the results are below.

Google = +3

Third Party Search Engines = +1

Average Adwords User = -3
 

Google will argue that it is providing a service and further information on your search term. If this was true though Google would be conceding that Ask.com and these other third party search engines are serving more relevant results than its search engine. At the end of the day, we all know that Google has done too superior a job on its search algorithm to concede search relevancy to a third party search engine. It is clear Google is winning the Search Arbitrage game at the expense of its customers and have done very little over the past few years to clean it up.

Dan Monarko is the Director of Digital Media at Flying Cork. He has worked with such clients as Tiffany & Co., Forrester & HSBC on their digital media efforts. Follow him on twitter @dmonarko.

Google

Comments

Posted by P Stroh on
How does one identify search arbitrate in a systematic way? (without eyeballing individual search results)
Posted by Dan Monarko on
The best way to identify if your keywords are being affected are tools like SEMRush.

SEMRush will provide you information on who your competitors are on your keyword set. If you see sites like ask.com, webcrawler, about.com and izito, you can bet your paying higher CPCs because of arbitrage.
Posted by Jay on
Thank you for your blog post Dan, good read.
I cam across this after searching for people facing the same problem.

We're an agency and are having a similar experience.

We have a client who is having major issues with search arbitrage. Dodgy search engines such as webcrawler.com are advertising using our clients registered trademark as keywords, and are ALSO using our clients registered trademark in their headline and ad copy. It get's worse, their headline reads 'Brand name Complains', so it is also bad PR.

Considering our client has a registered trademark for their business name, we've had pretty good success in the past in lodging a trademark complaint (particularly when the trademark is registered) and having Google block advertisers from using our clients protected trademark within their ad copy. However in this situation, after us waiting ~21 days for a follow up reply (and after us chasing them down to see what was taking them so long) we received a reply back from Google saying:

"please note that we will not be able to process for this term at this time because we found descriptive references to the term in its ordinary meaning. If you disagree with the advertiser's use of the ter,, you may contact the advertiser directly to resolve the dispute."

UNBELIEVABLE!!! Google don't be evil!?? This is evil.

We're continuing to chase them down, and hope to resolve.

Just thought I'd share our frustration so you know you're not alone.

Cheers.
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