Good search arbitrage: Buy low, sell high, add value

Defined as the practice of taking advantage of inherent price differentials in markets, arbitrage is often frowned upon as a sketchy, even duplicitous, business. While most often associated with financial institutions, investment banks and even casinos, this practice has found its way into the world of search.

And its entry for the most part has not been well received.

But is there such a thing as good search arbitrage? Most would answer this question with a resounding “no,” citing the multitude of sponsored-link-only sites whose sole function is to entice incoming purchased traffic into clicking forward to the next higher-bidding site. However, there does exist a few companies that provide value-added utility to their visitors and therefore both earn their premium and contribute to a more positive online experience. These sites, most of which are e-commerce concerns, deserve to be held in a more formidable light and should be commended for practicing good search arbitrage.

Despite all the negative buzz, there have emerged an increasing number of sites that engage in search arbitrage and are focused on adding value to the user experience. I refer to the many shopping sites, such as Nextag or Pricegrabber, often seen next to Google results as millions type generic terms like “digital camera” into Google and realize that, as great as Google search is, it does not provide a functional shopping experience.

Ironically, the opportunity for these sites to build a sustainable — if not substantial — business based on search arbitrage starts from Google’s drop-off of shopping- minded searchers. And by drop-off I mean both the decline in utility that happens when shoppers try to use Google’s search engine as a shopping tool, which it just was not designed for, and the drop-off of shoppers into the warm and waiting arms of the value-added shopping arbitrageurs.

In any case, there always have and will be sites that take advantage of the Google drop-off to practice their own form of value-add arbitrage. By designing sites that enhance the shopping-value proposition, with such benefits as price comparison, product data or customer reviews, these companies advance the buying cycle and gently nudge the shopper closer to the point of purchase.

So the next time someone mentions search arbitrage, instead of imagining the SLO sites we all love to hate, perhaps we should remember that there are arbitrageurs who increase the overall quality of the Web while making money on your traffic, a noble goal toward which we should all aspire.

(This article first appeared in the June issue of Essential Guide to Search Engine Marketing.)

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