How do you calculate profit in search arbitrage?
Profit is feed revenue minus ad spend. Per visit, compare revenue per visit with cost per click. For example, 1,000 visitors bought at $0.12 cost $120. If 20% of them click a sponsored ad paying $0.80, that is 200 clicks and $160. Profit is $40, a 33% return on spend, before any deductions.
Break the revenue side into its parts. With a two-click flow, revenue per visit equals Lander CTR times Ad CTR times RPC per paid click. In the example, a 50% keyword click rate and a 40% ad click rate give 20% of visitors producing a monetised click; 0.20 times $0.80 is $0.16 of RPV, against a $0.12 CPC.
Then apply reality. If 8% of that revenue is later removed, $160 becomes $147.20 and profit falls from $40 to $27.20, an ROI of 22.7%. Subtract a share of tools and staff and the figure shrinks again. Always calculate on finalised revenue where you can, and keep a margin of safety where you cannot.