Buy Low, Sell High: The Ethics of a Middle Man

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The volatile race to capture conversions has given the legendary commodities market a run for its money. But the “buy low, resell high” philosophy, known as search arbitrage, has left some in the search engine marketing, or SEM, community questioning the ethics of this new word brokering.
A term reserved mostly for the financial industry, arbitrage means buying product from one source and reselling it to another for a profit.

Sounds like the American way, right? Perhaps not. Because arbitrage is defined by the “sameness” of the resold product, the ethics of search arbitrage become gray.

Search arbitrage occurs when a buyer purchases a keyword from one search engine and links the ads using that keyword to another landing page filled with more ads that take the potential customer to another Web site. That next Web site may – or may not – be applicable to the searcher’s initial inquiry because the secondary ads do not contain the exact original keyword. It’s typically the same category or similar interest, but not exactly the same terms. This is where the “sameness” becomes a factor.

The host, or “publisher,” of the ad-filled site makes a profit on that consumer’s second click-through. The advertiser views this publisher as an “affiliate,” and pays him based on those conversions.

It’s a helpful alternative for advertisers with a heavily diversified product line, especially when the consumer is searching with keywords for a niche item. It saves considerable time and administrative cost to bundle these more-obscure searches into an affiliate program like search arbitrage. The company still connects with its potential consumer, and the publisher, not the company, spends his time buying the keywords, reselling them and managing the host site.
Aside from the fact these landing pages often contain little or no content, search arbitrage proves, eventually, to be one-sided. It’s a short-term gain for the publishers, but a long-term loss for the brands they represent.

Consumers, time and again, have proven they will turn their backs on a company when it takes too much effort to reach the product, especially on the Internet. The tiny window of the consumer’s passive acceptance of arbitrage no doubt will close.

Search arbitrage is creative, but not necessarily ethical, and companies searching for ways to stay competitive in markets with desirable keywords are not going to like the end result. Consumers will draw away from searching the Internet if the reason they’ve come – to save time and money – is defeated.

For sure, any effective marketing campaign today includes a strategic Internet presence. It is more important than ever for companies to know exactly where their SEM partner stands on the ethical lines of today’s search marketplace, including arbitrage.

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