Introduction to Traffic Arbitrage: Basic Terminology
- Traffic Arbitrage is the process of buying internet traffic (users) from one or more platforms and redirecting it to other websites or offers with the aim of making a profit. Simply put, traffic arbitrage involves purchasing traffic at one price and then selling it at a higher price.
- Traffic refers to all the users who visit a website or any other online platform. Traffic can be divided into several categories, such as organic, paid, referral, direct, and so on. In the context of traffic arbitrage, we specifically talk about paid traffic — users who visit a website through paid advertising campaigns.
- Media buying is the process of purchasing advertising space on various platforms. The goal of media buying is to capture the attention of a target audience by placing advertisements (launching ads that users will click on). Media buying involves choosing the platform for ad placement, setting up and launching advertising campaigns, as well as continuously monitoring and optimizing these campaigns.
- Landing Page is the target page to which a user is redirected after clicking on an ad.
- Conversion is the action that a user is supposed to take on the landing page. This could be a purchase, registration, form submission, app installation, newsletter subscription, etc.
Conversion measures the effectiveness of an ad campaign and shows how successfully traffic is being converted into desired actions. - Buyer is a specialist involved in media buying and traffic arbitrage. Their main task is to purchase traffic at a low price and sell it at a higher price. A buyer creates, launches, and optimizes ad campaigns, tests different strategies, and uses analytical tools to maximize the effectiveness of their actions (aiming to earn as much profit as possible).
- Source (Traffic Source) is the platform where the buyer purchases traffic for their advertising campaigns. Simply put, it’s the place where the traffic comes from. These are mainly ad networks that place ads in search engines. For example, if you choose Google Ads, you create ads and pay Google to show those ads to users who are searching for specific keywords.
- An advertising account on the platform is your personal dashboard where you create and manage your advertising campaigns. Through this account, you interact with the traffic source and gain access to all the tools necessary for ad placement (campaign setup, budget management, etc.).
- Partners are the owners of websites or apps that host advertisements for various products and services on their platforms. They provide their sites for ad placement and receive payment for doing so.
- Websites are landing pages owned by the partner that promote the advertiser's products or services. The website owner (partner) earns a commission from the advertiser for each completed user action (e.g., a purchase or registration).
How Traffic Arbitrage Works
Explanation:
- A buyer places an advertisement on a source* and pays for each user click on it.
- When a user clicks on the ad (we pay for this), they are redirected to the partner’s website. On this site, ads for various products or services from third-party organizations are displayed.
- The user is interested and completes a specific desired action on the site (we get paid since we brought that user to the site).
Our Profit is the difference between the amount we paid the source for the user (Cost) and the amount the partner paid us for bringing that user to them (Revenue).
Advertising Payment Models
- CPC (Cost Per Click): payment for each click on an ad, meaning payment for each user who visits the landing page. This is beneficial for the advertiser when the goal is to increase site visibility..
- CPA (Cost Per Action): payment for a specific user action on the landing page (making a purchase, registration, filling out a form, etc.). This is beneficial for the advertiser when they only want to pay for conversions.
- CPM (Cost Per Mille): payment for every thousand ad impressions. This is typically beneficial for increasing brand awareness and widespread visibility of the advertiser’s offerings.