first, lets make sure we make the distinction between
- using PPC to drive traffic for affiliate sales (this is what Shoemoney did)
- using PPC to drive traffic, banking on the fact that a good percentage of your visitors are going to exit via paid advertisement on your page (my definition of PPC arbitrage)
I've got nothing against number 1 -- I plan on tackling that full force in the near future. I'm no expert on number 2, but I've done it successfully on a small scale (I'm working on some automation tools to try it big scale). The most important thing is being able to see what keywords are converting (preferrably in realtime or near realtime). Then, after a brief period (usually a few days, but sometimes much less) you can weed out non performing keywords so that you're not paying for crap traffic,
OR, create content to cater to those people that aren't converting.
To get started, you'll want to select a few niches and start doing some keyword research. Ideally, you're looking for many advertisers and a decent spread (difference between advertiser bid prices). Graywolf posted a good article on this (
http://www.wolf-howl.com/sem/adsense-arbitrage-automation-and-button-pushing/). Its not entirely necessary, though, as you can simply target the low-hanging-fruit keywords and direct your visitors toward the $money$ content. Also, very important, is how you present your contextual advertisements onpage -- if they blend well and are done right, you'll get high conversion (I get 30% without looking spammy at all in my opinion).
hope this helps, feel free to ask more specific questions.
_b