PPC vs. Affiliate Arbitrage – Part 1
by Editor, DM Confidential
Earlier this week, the ever acquisitive ValueClick announced that it added a new company to its interactive marketing mix. We hadn’t read the release when asked what we thought Valueclick paid for the 4th ranked comparison shopping site MeziMedia, operators of Smarter.com. If you still don’t know the price, stop now and visit Mezimedia.com. What do you think the company made in 2006? We guessed 25 million. Turns out the company earned $40 million last year and that Valueclick has agreed to pay $100 million. And, that’s just the starting point. If MeziMedia hits its number, they stand to push the total price past $350 million. Look at their growth here, especially compared to leader Shopping.com, and the price starts to make sense.
Valueclick companies, though, always seem to have a layer of revenue that hides beneath the surface. Webclients has their enormous incentive promotion business. MeziMedia has PPC Arbitrage. A company that, at one point, earned 90% of its revenues, not from comparison shopping but, from buying traffic on non-Yahoo search engines and sending their traffic to other search listings. Valueclick always seems to pay a fair price and pick companies that know how to make more money under their wing. As a result, I expect the same to hold true for MeziMedia. It does, though, make for a good time to examine the PPC arbitrage landscape. Normally, this means focusing on those doing CPA arbitrage, such as our recent research on Blockbuster. Today, we look at two different types of arbitrage – buying search to send to other search listings and buying search to drive affiliate commissions. We begin with those who spend on clicks to drive traffic to higher paying click traffic.
A. Domainers – this first group has in their own way always done arbitrage and earned revenue off click traffic. The rise of search has not only enabled them to earn more money on their type-in domain traffic (and as a result increase the sale price), it has also become a means for the more savvy to drive traffic to their names. Some might buy traffic to try and make the domain look more valuable than it is, but many domainers just like opportunities to make more money. They already have the mindset of risk, so search simply represents an extension of that. The two examples here come from affiliates using the parked pages as a means to have an optimized and keyword relevant page.