Sidebar: How internet ad arbitrage works

Along with the 200 web sites and the big domain names, like hockey.com, that it eagerly publicized, Geosign also owns — through a subsidiary or associated company by the name of NYCGroup.com — some 90,000 other domain names including thefart.com, canadianrockiestour.info and myrtlebeachresortdirectory.com. Performing a “who is” search on these sites shows they are affiliated with NYCGroup, although it is not always made clear that NYCGroup is connected to Geosign.

Geosign drove traffic to these sites by buying cheap Google ads. The sites are designed in a similar manner with no ads on the landing page, which functions as kind of index. To get off these landing pages many visitors opt for the simplest method and minimal mouse action, namely clicking on one of the links, which brings them to a second page filled with more expensive Yahoo ads or “sponsored results.”

Every click on these pay per click ads earns Geosign money, a business that can be profitable with as few as 10 visits a day per page. Given the number of domains Geosign owns, it had a perfect long tail speculative business. If it gets 20 cents for every click with 10 clicks on every site times 90,000 sites, that’s $5.4 million in a month and all it has to do is pay the next-to-nothing overhead for a bunch of spam or so-called made-for-advertising sites.

Google’s and Yahoo’s roles

Google has stricter rules regarding made for advertising sites than Yahoo, which may explain why Geosign displayed and continues to display Yahoo ads. While these sites are cash cows for both Google and Yahoo in the short term, they have caused enough damage to the credibility of online advertising that Google realizes they are not necessarily in its longer term interest. Neither Google nor yahoo would agree to discuss the issue.

When Google recently reported second quarter earnings that fell short of expectations, John Krystynak who runs a well respected blog about online advertising wrote: “I can’t say I’m surprised at the miss, because Google eliminated a lot of advertiser spend this quarter with their ad quality improvements. In short, they kicked a lot of advertisers out of AdWords.

By focusing on the worst of the arbitrage, and made-for-adsense type sites, they took a hit. These were the sites that would basically consist of all ads, and so when a user clicked away from a Google ad, they’d go to another site, full of ads. Not the best experience. By eliminating those types of advertisers from the system, they cost themselves money in the name of ‘better’ ads.”

Of course, one of the low-quality advertisers to get the boot was Geosign.

2 thoughts on “Sidebar: How internet ad arbitrage works

  1. Its seems as thou, google has not eliminated all spammers yet. I still come across sponsored ads on google search pages leading to a landing page setup to display Yahoo text ads.

    I could never figure out how these sites were making money by paying for clicks on google. They are not promoting any products but just fillid bunch of text which looks like text ads. I knew they are ads but didn’t know they are Yahoo ads. It makes all the sense now how they able to pay google for clicks and generate profit from text ads (yahoo ads) on their pages.

  2. @Niche A M

    Spammers? I don’t think so. This is simply arbitrage, a concept which should work in any emerging free market and one which we as established registered companies exploit.

    Please don’t believe the hype circulated by Google et al. We’re not spammers, we’re not going to take your bank details, and we don’t aim to provide a poor user experience – far from it.

    Our model only works because users on major search engines find our ads the most relevant thing on the page (whether algorithmic or paid). We then provide alternative, and dare I say, more relevant links (whether paid or not).

    The problem we have as arbitrageurs is that we’re too good at what we do. We drive millions of dollars worth of traffic from one network to another – and that’s the issue, do you think Google wants to line the pockets of Yahoo with their own traffic? No.

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