Click Arbitrage: Getting Out Of Hand?

SEOMoz has a good on post on getting caught in an arbitrage loop. Clearly, this is getting ridiculous:

Behind the veil is AdSense (and to a lesser extent, other contextual ad systems like Azoogle & Yahoo! Publisher Network). They could very easily shut down the practice of arbitrage (and thus, improve the quality of users’ experiences across the web), but they choose not to. Why? Because contextual ads like this are a huge source of revenue. Those millions of clicks purchased by ad middlemen drives up the cost of ads and the return earned by the ad providers.

The thing about arbitrage markets is that they should eventually correct. The practice of arbitrage will eliminate price differentials between different markets.

However, I’m of the opinion that PPC is heading into very troubled waters. Ultimately, prices must top out, as a vendor cannot spend more than the cost of sale, and any abuse just compounds the issue. Any search engine that relies on a PPC revenue stream, and that’s all of them, could be highly vulnerable when the eventual tipping point arrives.

One wonders just how far away a Google CPA product is…

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