The Endless Chain of PPC Arbitrage: Lessons from Monitoring SaveSmart

sam.engel Sep 18, 2013

How is PPC arbitrage similar to Six Degrees of Separation from Kevin Bacon? It may sound like the setup to a bad joke, but here's the point I'm hinting at: PPC arbitrage can produce multiple layers of removal from the user's intended destination. Arbitrage can essentially take a user from intermediary to intermediary, potentially without ever resolving on a landing page with any useful content.

When we've previously written about these tactics, we've generally identified a pathway that circles back to the brand's domain in a rather direct way. Or, at the very least, it's gone to some kind of final destination that isn't another arbitrager. But that doesn't always have to be the case.

Arbitrage Can Simply Lead to More Arbitrage

Recently, we've observed some interesting activity from a site called SaveSmart. SaveSmart has been engaging in some basic PPC arbitrage, targeting various branded keywords related to coupons and then serving up ads that it syndicates from Google. By itself, that's nothing new. But here's where it gets interesting: many of the ads that appear on SaveSmart's landing pages lead to other arbitrage sites!

Normally, your basic form of PPC arbitrage can be defined as an advertiser purchasing ads so that they can show other ads. In other words, ads leading to more ads. But here, we actually see it go a step further: ads leading to ads leading to even more ads. And it can go beyond than that. Let's dive into an example below.

A Sample Sequence of Pages

After following the links that turned up on SaveSmart and other sites, we identified this potential user pathway. It's a bit convoluted, so I've broken it down into steps below:

Example of PPC Arbitrage

Step 1: User searches for "Lands End coupon" on Bing, and clicks on a SaveSmart ad.
Step 2: On its landing page, SaveSmart loads in new ads (which it syndicates from Google) for the search term "lands end coupons codes."
Step 3: User clicks on the WiseShop ad that claims 50-75% savings.
Step 4: On its landing page, WiseShop loads in more ads (which it syndicates from Bing) for the search term "lands end coupon code."
Step 5: User clicks on the Savings.com ad at the top that claims a 40% discount.
Step 6: After landing on the Savings.com site, the user clicks on a "Get Coupon Code" affiliate link.
Step 7: User finally ends up on LandsEnd.com.

Degrees of Separation

Depending on how you look at it, this sequence has either 2 or 3 intermediaries between the user's original starting point and their final destination. If you count the coupon affiliate Savings.com as an intermediary, it's 3. If you count only the arbitragers, it's 2. (This is probably a topic for a different post, but since the original keyword used the term "coupon" in this case it seems reasonable that a user would be looking for a coupon site instead of the merchant's site).

In either case, this would be a nightmarish user experience. It simply adds new hoops for the user to jump through, creating friction. If the intervening steps don't bring the user closer to their goal, they may simply bounce. So ultimately, that friction is bad for the brand because it can quickly result in attrition.

Beyond that, these ads also inflate the cost-per-click (CPC) on branded keywords for Lands' End. We noticed some interesting cases where a Lands' End ad would even show up in the results on some of these arbitrage sites. So it's entirely conceivable that, in a different scenario, a user could move across a series of several arbitragers, finally clicking on a Lands' End ad that takes them to the brand's site. In that scenario, Lands' End would essentially be subsidizing the PPC arbitrage.

I'll explain that a bit further. Arbitrage only works when there's another advertiser down the line who's willing to pay for clicks. That's the only way for arbitragers to skim a profit. If they pay for clicks to get traffic and then can't get enough ad clicks on their own site, there's nothing in it for them. That means that other advertisers are indirectly (and unintentionally) financing this. In our initial example, that advertiser ended up being Savings.com. But based on our observations, Lands' End would also be subject to this.

Getting These Ads Removed

Fortunately, because these ads all use the brand's trademark in their ad copy, they are eligible to be taken down by sending a trademark complaint to the relevant search engine (the Google trademark complaint form, and the Bing trademark complaint form). Of course, if you're a BrandVerity client, you can already generate these complaints in bulk within our interface.

By sending these complaints, a brand stands to benefit in a number of ways. Beyond being able to maintain stronger brand integrity and brand image, the brand can also increase visitors (by preventing traffic from being diverted) and decrease CPCs. In this case in particular there seems to be a lot for the brand to gain, simply due to the volume of arbitrage ads and the level to which they saturate the market.

It would also be interesting to see what the typical user experience is like in these scenarios. This would probably shed some light on the economics that are working themselves out here. It might even help provide an understanding of the relative share of arbitrage ads as opposed to ads by the brand or ads placed by coupon sites. If anyone has encountered something similar in the past, we'd certainly be interested to hear what you may have learned from the experience.

Topics: Affiliate Marketing, Trademark and Law, Paid Search

What you don't know will hurt you. Start monitoring and protecting your brand.
Don't Miss Out

Get the latest insights on brand protection, compliance, and paid search delivered right to your inbox.