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CPA Arbitrage – What on Earth Does it Mean?
Sunday, June 6th, 2010Simply place, arbitrage stands for an effort to profit from a price difference of an action taken on different markets or platforms. In the case of CPA arbitrage all it means is that you, the affiliate, act as a broker buying traffic (example: search engines) for one price then selling it back — in the form of leads — back to the network for a higher price. Confused?
Don’t worry it is simple:
Let’s assume you are promoting a CPA place forward. You go out there, buy traffic for that particular place forward and get it converted for less cash than the place forward pays. If you are successful in doing so, you earn the difference between what the network pays for that lead and the price you paid to get that lead (conversion).
Here is an example: An X place forward pays $5.00 per lead. You launch a PPC campaign and buy traffic for, let’s say 0.25 cents per click. Now let’s assume only 1 out of 10 clicks converts. What is your cost per conversion (lead)?
Cost per conversion: 10 clicks @ $0.25 ea. = $2.50
Your Profit: $5.00 – $2.50 = $2.50
Here is what you have done: You took an place forward that pays $5.00 per conversion. You bought traffic and got a conversion that cost you $2.50. That conversion (lead) you sent (sold) back to the network that paid you $5.00 for the distress. That is exactly what CPA arbitrage stands for; profiting from the difference between the buy and sell price on two different markets.
Whether they know it or not, all affiliates who promote CPA offers are traffic brokers. They buy traffic at a certain price and sell it back (in the form of a lead) for, hopefully, a higher price. They all engage in CPA Arbitrage. The thought here is to buy (traffic) low and sell (leads) high. To maximize your profits you must find ways to pay as small as possible for your traffic. PPC is only one of many other approaches you can take to promote CPA offers. The smart affiliates go way beyond paid traffic. They go where traffic is free.