Traffic Arbitrage: the Concept and Types
Traffic arbitrage is a business process where traffic is purchased at a low cost and resold at a higher price. Professionals in this field, known as media buyers or arbitrageurs, engage in buying and selling traffic, redistributing it from one source to another, and earning a profit from the price difference.
In this article, we will discuss what traffic arbitrage is, the various types of traffic, the role of a media buyer, and how to pursue a career in this profession.
What is traffic arbitrage
Traffic arbitrage is the process of acquiring customers for a percentage of the sales revenue without a dedicated budget. Typically, a media buyer invests their own funds in setting up advertising and receives financial compensation in return.
Here's an example: A company needs to grow its customer database and approaches a media buyer, offering them $4,000 for each lead generated. The arbitrageur invests $15,000 in setting up an advertising campaign and attracts 5 customers. As a result, the specialist earns $20,000, with $5,000 as net profit.
This is a simplified example, and in practice, it's more complex. Without a sufficient budget, in-depth market knowledge, and significant experience, profiting from traffic arbitrage can be challenging. There are cases where an arbitrageur incurs a loss: they spend $10,000 on advertising but receive only $7,000 from the client. This happens due to a lack of experience.
Earnings in traffic arbitrage are the difference between what the media buyer spent on advertising and what they received from the client.
Types of arbitrage traffic
Depending on the source, there are six types of traffic:
Direct traffic. Users manually enter your website's URL into their browser.
Organic traffic. Visitors find your site through search engine results.
Referral traffic. These are clicks from other websites, apps, messengers, or partner sites that link to your site.
Paid traffic. This type of traffic comes from paid advertising campaigns, such as contextual or targeted advertising.
Social media traffic. Users arrive at your site from social media platforms.
Undefined traffic: Traffic with an unknown source or origin.
The types of traffic arbitrage
To enter arbitrage with minimal expenses, a media buyer should ideally have platforms with high traffic of their own. This way, they can attract clients for free, although, in most cases, any form of advertising placement is paid.
In terms of legality, there are different classifications in traffic arbitrage:
White arbitrage. This involves the promotion of legitimate products and online stores. For example, an electronics online store may use methods like targeted advertising, SEO, or social media posts.
Black arbitrage. This involves the promotion of products and services that deceive users. Black hat methods include using misleading headlines, bypassing ad restrictions, and more. For instance, when a person is automatically redirected to a website without clicking on an ad, or when an arbitrageur directs traffic to an offer with knowingly deceptive information.
Gray arbitrage. Grey hat arbitrage falls between white and black hat strategies. In this case, the media buyer promotes an offer that partially conceals the truth from the user. This category includes offers from gambling services, dietary supplement sellers, and similar niches.
What a media buyer does
A media buyer, also known as an arbitrageur, is a person who earns money by selling traffic. They are responsible for setting up and launching advertising campaigns and redirecting the acquired traffic to the required website.
If someone chooses this profession, they must be skilled in analysis, have a fundamental understanding of marketing, and be knowledgeable about various promotion methods, whether it's contextual advertising, SEO, or SMM (Social Media Marketing).
Media buyers are often confused with marketers because their goals are similar, which is online promotion. However, there are distinctions between these professions.
| A marketer | An arbitrageur |
|---|---|
| Typically receives a fixed income or salary. | Earns income entirely based on sales and expenses. |
| Works with specific clients or for a particular company. | Can interact with an unlimited number of clients or sources. |
| Follows a predefined work plan that needs to be executed. | Doesn't have a predefined work plan but must generate leads or sales to earn money. |
| Utilizes an allocated advertising budget provided by the client or company. | Uses personal funds for purchasing traffic and other expenses. |
Customers should remember that arbitrage can have a negative impact on a company's reputation. You don't have control over the promotion methods used by media buyers. If your ads appear on questionable websites, it can damage your brand's reputation. Arbitrageurs are not held accountable for this, so it's important to choose specialists carefully.
How to earn money in traffic arbitrage
Learn as you go: this is the riskiest option because it's challenging to make a profit without prior experience. Beginners often end up spending their budget without achieving success, which can be discouraging.
Take courses on various topics: a media buyer needs to understand various methods of promotion. You can take separate courses on SEO, contextual advertising, targeted advertising, and more. It's essential to apply your knowledge in practice after completing each course.
Complete comprehensive training: this is the most optimal solution. You will learn how to set up advertising campaigns correctly to generate sales. Such courses may take longer, but you will gain insights into working with analytics and earning more while spending less.
Getting Started in Arbitrage
Novice professionals often begin their journey with CPA networks. These platforms offer offers with payments for specific user actions, such as making a purchase.
After gaining experience, professionals collaborate with brands and negotiate terms that suit them, often working at a higher rate.
How to work with traffic arbitrage
Summary
Traffic arbitrage involves purchasing traffic and reselling it at a higher price. A person who engages in traffic arbitrage from scratch is called an arbitrator or media buyer. They attract leads using their own funds, and companies pay the arbitrator for a certain number of leads or specific actions they have taken. Traffic arbitrage can be either paid or free, and the methods of attracting traffic vary widely, from contextual advertising to social media promotion.