N00b Arbitrage Tutorial

Status
Not open for further replies.
BNWFinance

BNWFinance

$100/day in 100 days.....
Aug 10, 2006
146
1
0
Margaritaville
www.myfinanceforum.com
Okay, I'm a n00b at arbitrage - I admit that. Since so many others here at WickedFire seem to engage in this mystery, I decided to educate myself and in the meantime, educate any future n00bs that come along at the same time. It's called "giving back to the community". I also fully expect the really helpful people here at WF to chime in with advice and tips as they normally do. I'm posting this since I haven't found something like it in one place on WF yet and hopefully it will help out people who come along looking for the info like I did.

My first post here will be basic information on what arbitrage is, and how it works.

So on to some basic information:

What is "Arbitrage" ?
Arbitrage is the process by which one makes money using ads and a CPC or other ad space purchase programme to drive traffic to a web site or sites. In other words, you create a keyword-targetted web site. Then, you place ads on the web site pages. Finally, you initiate a CPC campaign or purchase ad space (there are lots of places/ways to do this) to drive traffic to your site.

What is the "trick" to making money with Arbitrage?
The "trick" is common sense: the traffic you get via your CPC campaign MUST cost less than the revenue you get back when that traffic clicks on your ads. This means that you need to do the math. Your conversion rates (ie. CTR) and the price of your CPC campaign should give you a good idea of whether a specific campaign will work or not (more in future posts as I figure this part out myself).

Hopefully this gets the ball rolling. I still need to figure out the precise math before I open my mouth and stick my foot in it. Ideally, one should be able to do a little niche market research, apply some basic math, and determine whether a niche campaign will be profitable or not before getting started.

If I've missed anything or there are inaccuracies, I'm sure the posts that come in after this will let me (and everyone else) know about it.
 


Good post. If there's one thing I've learned about arbitrage, it's that different things work for different people. That's why it's so difficult to put together a "tutorial" on arbitrage. It's not that cut and dried. You have to be willing to experiment and lose a little money... figure out what works. Eliminate the shit that doesn't and keep plugging away.
 
Jack Swift said:
Good post. If there's one thing I've learned about arbitrage, it's that different things work for different people. That's why it's so difficult to put together a "tutorial" on arbitrage. It's not that cut and dried. You have to be willing to experiment and lose a little money... figure out what works. Eliminate the shit that doesn't and keep plugging away.
Click to expand...

The other thing that is difficult is just getting people to just fucking do it.
 
So it seems there are 5 basic steps in the "Arbi" process:

1. Niche Research
2. Web site design/implementation
3. Stat Tracking and Ad Tweaking
4. ?
5. Profit

(I'll give rep to the first person who can name the reference I just made to a popular animated TV series...)

Let's talk about Niche Research. So far, I've used my Google AdWords account KeywordTool to estimate potential traffic and revenue:

https://adwords.google.com/select/KeywordToolExternal

I look for keywords (almost at random) that have low competition and average or better volume and plug in those keywords to an AdWords campaign. AdWords then spits back some numbers to me showing what I need to bid and how much traffic I can expect. Do I trust these numbers? Not really. See, they're just estimates. And they're low. Really low. I go with the recommendation in several other threads and in Jon's blog entry about $0.10 per keyword doing CPC, but I can't seem to make the numbers work on AdWords based on my current earnings via AdSense.

Let me back up a tick. I currently have sites online with AdSense that do okay. But I want them to do better than okay. I want to make a living at this. So, using the existing AdSense stats I have, I can estimate the average value of a Click Through on a given site. This will change, but its just an estimate. If my current clicks are generating $0.31 on average and my CTR is averaging around 9%. Thus, for every 1,000 visitors, I can expect roughly $27.90 in AdSense revenue. Still with me? Going back to AdWords, if I bid $0.10 on one of my niche keywords (which gets me in the 4th-6th results position) I get approximately 4-5 clicks per day. Let's assume I kick ass and get all 5 estimated clicks. It costs me $0.60 to get people to my "door". I convert at 9% so if I'm lucky, one of those people click on my ads generating me...wait for it....$0.31. This is a loss of $0.29 or 52%. There must be something I'm doing wrong here...Wrong tools (AdSense/AdWords)? Wrong method (poor research,bad math)?

To be continued...
 
don't need any rep but gnomes stealing underwear are great.

1 - steal underwear
2 - ???
3 - profit!

anyway, back to arbitrage..
 
I would guess the main culprit here is the CTR of 9%.

If you listen to Jon and others making a profit off this, it's always CTR > 30% or even >40%

Is there leakage on your sites? I.e. are there links to the outside other than ads?

::emp::
 
emp said:
I would guess the main culprit here is the CTR of 9%.

If you listen to Jon and others making a profit off this, it's always CTR > 30% or even >40%

Is there leakage on your sites? I.e. are there links to the outside other than ads?

::emp::
Click to expand...

There are some, but most of them are to my other sites. Some days, the CTR is 20-30% or more on some ad blocks, but the monthly average of all blocks is 9%.
 
Sooooo...plug those leaks.

Linking to your other sites is OK in my book, but if every one of those sites has leaks to the outside....

::emp::
 
emp said:
Sooooo...plug those leaks.

Linking to your other sites is OK in my book, but if every one of those sites has leaks to the outside....

::emp::
Click to expand...

Thanks for the feedback, emp - this raises a question. My partner and I are engaged in very white-hat stuff and are supplying unique content. To that end, occasionally we need to attribute our sources or provide links to more info. How do you suggest we accomplish this while limiting our outside links?
 
You can't, really.

Another question is how well do the ads "blend in" with your content?
Have you tried the usual improvements? e.g. Adjusting the colors of the ads, putting pictures next to them, etc?

improvectr.com sums it up nicely, you might also want to browse this forum some more.

::emp::
 
emp said:
You can't, really.

Another question is how well do the ads "blend in" with your content?
Have you tried the usual improvements? e.g. Adjusting the colors of the ads, putting pictures next to them, etc?

improvectr.com sums it up nicely, you might also want to browse this forum some more.

::emp::
Click to expand...

You betcha - that stuff is a must in my books. The pictures did have a major impact on CTR (we just did it this month after reading about it here on WF). Thanks again for all the tips.
 
BNW - if you are looking for a formula, I use standard deviation to determine if I am going into a niche. there are a few rules that will save you alot of money. they are very simple and must be followed.
1. there should be 1 page with NO leaks
2. content should be super general (you are not trying to educate here you want people to click ads)
3. you should run lots of sites to make a full time income!
 
chrislingle said:
BNW - if you are looking for a formula, I use standard deviation to determine if I am going into a niche. there are a few rules that will save you alot of money. they are very simple and must be followed.
1. there should be 1 page with NO leaks
2. content should be super general (you are not trying to educate here you want people to click ads)
3. you should run lots of sites to make a full time income!
Click to expand...
So there is someone else that uses standard deviation on here! I made a post awhile back asking something like that but all I remember from that was engaged saying something like stop being a bitch or one of his just do it posts. :p
 
chrislingle said:
BNW - if you are looking for a formula, I use standard deviation to determine if I am going into a niche. there are a few rules that will save you alot of money. they are very simple and must be followed.
1. there should be 1 page with NO leaks
2. content should be super general (you are not trying to educate here you want people to click ads)
3. you should run lots of sites to make a full time income!
Click to expand...

Chris, would you have any problem with posting your excel or formula here? Not just for me, but the other faceless throngs of n00bs? Thanks for the additional points. I think I now understand the whole point of general content and no leaks...It just makes sense from a marketing standpoint.
 
Another way to make your ads stand out is to make all of your text and internal links (links to other articles within your site) the same color, while using the bright blue default link color for your text ads. This keeps attention away from your other links and focuses it on your ads.

It ain't pretty but I think it boosts CTR.
 
emp said:
Here is the thread Xrproto is talking about:

http://wickedfire.com/showthread.php?t=2289

Anyhow... anyone care to share some more info on that "standard deviation"?
I know the statistical term, but..huh?

My standard deviation is to .. err....oops..... carry on....

::emp::
Click to expand...


Ah! That's the one.

Anyway, I don't use standard deviation for arbitrage but have incorparated it into my niche choosing for some long term sites, I haven't tested any of the long term sites yet though.
 
Status
Not open for further replies.
Top Bottom
Back