Arbitrage is the technique of buying low and selling high. AdSense arbitrage is buying traffic with low cost PPC ads and then selling PPC to others at a higher price. Be sure to read AdWords vs AdSense first, then read on.

There is more than one way to go about working AdSense Arbitrage – the difference is in the source of your traffic.  We will first look at using sources other than Google.  Again - this is the theory part.  Actual application and case studies come later.

AdSense Arbitrage Method

Buying traffic from PPC providers other than Google.

Google has very high prices for their clicks. This is because Google has one of the largest networks of sites for PPC ads and 40% of all searches online are done through Google. How much can a 900 pound gorilla charge? Whatever he wants. So if you have an article on mortgage rates with high paying AdSense ads for the keyword “mortgage rates”, it would not make sense to be buying high cost traffic from Google’s AdWords for the same keyword. The most you could hope for is a wash. But in reality, even if your site and AdSense ad placement are very successful, you will only get about a 40% click through rate if you are skilled and a bit lucky. So at best, it’s a wash and at worst it’s a bust.

The solution? Buy PPC ads from a different provider with a cost per click rate for the keyword “mortgage rates” that is much lower than Google’s rate. Shoot for 75% lower at a minimum. If you pay $0.95 per click to get traffic, you should be targeting keywords that get you about $3.80 per click. $3.80 per click may seem like a lot, but in reality, a keyword phrase like mortgage banking can get $15 per click – and that’s a low estimate.

So - in theory - your profit model would look something like this:

(of course, a 40% CTR is crazy - which is why this article is uses the word "theory")  The key is to find keywords where the difference between the cost at one provider and the cost at the other is large enough to make a profit. To get information about keywords and the cost differences quickly requires a program like Keywords Analyzer or Keyword Elite.  I use Keywords Analyzer and will be putting up a review of both applications soon. With either of these programs, not only can you find keywords, brainstorm niche site ideas, and generate thousands of variations, you can use Keyword Analyzer to find good AdSense arbitrage keywords. With it, you can see the difference between the highest price on other ad campaigns with the average price on Google AdSense for the same keywords. Then you can create content around those keywords and build a niche website to house your high paying AdSense ads.

The other part of the equation is to increase the click through rate on your site. AdSense positioning, and color scheme as they relate to the site’s content are critical. Also - the only way out of the site should be by clicking an ad - don't give the user any other choices.

AdSense Positioning

Google allows three ad groups per page. Since the proliferation of advertising online, people have become numb to ads. They have what is known as “banner blindness”. So you don’t want ads to look like ads. How? Try these three things:

1. Make the background color of the ad the same as the website
2. Do not use a border around the ads (make the border color the same as above)
3. Make the link color and text color the same as the links and text on your site

You can use text ads and link ads. The text ads go in or near your content such that they look like a part of your content. Link ads can be placed near navigation to look like menu selections. For positioning, try one of these three options.

Of course you can try other configurations and color combinations – just be sure to track the performance and CTR of your AdSense ads.

Keep Track

In Google’s AdSense control panel, you can create channels to place ads in. Google lets you look at each channels (each ad’s) performance separately. Thus, you can track the performance of each ad and tweak as you go to maximize your CTR.

I suggest limiting your monthly PPC budget to an amount tha you can afford to lose. For example, on my very first AdSense experiment, I set a budget of only $10.00 per day and watched it closely. The PPC ads cost me $22.00 – and I made about $19.00 on AdSense. So I stopped the campaign – not because I was worried about losing $3.00 – but because I was doing something wrong.   I am working on an AdSense Arbitrage case study to flesh out the issues and try some different things.

With AdSense Arbitrage, a good goal is to make about $1.50 for every $1.00 you spend. If a niche site does not profit, can it right away. If a niche site does very well, consider expanding it. But be sure to focus only on the profitable sites and drop the rest as soon as possible – that way, you can stay in the green.  Such is the theory.  Time for the application.