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This has been the question that has plagued many domain owners for years and years. Should they enter the world of arbitrage or not? Put simply arbitrage or Arb is buying cheap traffic and selling it for a premium. Sounds simple and deliciously lucrative but there are HUGE risks.
 So why is this practice hurting the domain industry and what are the risks involved in doing a little Arb on the side? The first question you should always ask is why is the person selling you the traffic at all? Just think about it for a minute. If the traffic you are about to buy and send to one of your domains is of such high quality then why doesn’t the seller send it directly to Google and Yahoo themselves? The simple answer is they can’t.
The reason why they can’t is because the traffic isn’t of good quality at all. If you are about to purchase traffic from someone then ask them why they don’t go directly to G/Y themselves and make a killing rather than selling you the traffic. The fact is the traffic is sub-standard and G/Y rejected it a long time ago.
What the seller is hoping is that they can sell you traffic at no risk (ie. they get their money) and you can wash it through some of your domains (which you purchased at your expense) and G/Y won’t notice that it’s the same traffic they rejected before. Pretty clever really except it has a number of downsides.
The first relates to risk management. The seller of the traffic no longer has any risk – that’s great news for them! The domain owner/traffic buyer has all the risk and they are the ones that cross their fingers for 90 days hoping that there isn’t a clawback. I can almost guarantee that there will be.
Both G&Y have developed some pretty smart systems for eliminating this type of traffic from their networks and if you are ever tempted to play in this space then be prepared for a nasty surprise. I’ve seen domain owner after domain owner get tempted by the potential riches of Arb only to get burnt really badly. You may be lucky and make a few bucks for a time but it’s no way to develop a long-term sustainable business.
The biggest problem with most traffic sellers is that a huge majority of the traffic comes from manufactured sources such as botnets. This traffic is fraudulent in nature but the buyer often has no idea what they are purchasing….they just want traffic to dump on their domains. Bad move.
Once G&Y discover this type of traffic on a domain they typically ban it forever….which means you need to purchase another domain to run the scam again. Worse than that, we have seen that the big G ban entire accounts of good (ie. No arb on them) and bad domains because they discovered Arb on some domains in the account. It’s just not worth it.
The recent changes to using CNAMES and banning redirects means that Google is going to get even more information to help them with weeding out the good traffic from the bad. If you plan on selling Arbed traffic to Google in the future then I’ve only got one thing to say….good luck to you!
When you “do Arb” it costs to purchase the traffic and domains to send the traffic to but it also means that the revenue generated by the traffic may receive what is known as a “clawback” for up to 90 days. A “clawback” is where G/Y debit your account with a number that is normally the total value of the Arb traffic. Don’t get too excited about the stats you see in your account, only count your money after 90 days…..better yet, just don’t do it.
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