Buying traffic · also called tier 1 countries, T1, T2, T3
Tier 1 / Tier 2 / Tier 3 geos
Geo tiers are an informal industry ranking of countries by how much advertisers pay for their clicks, with Tier 1 the highest-paying markets.
There is no official list. Tiers are trade shorthand. Tier 1 usually means wealthy, high-spending, mostly English-speaking markets: the United States, the United Kingdom, Canada and Australia, often with Germany and other rich Western European countries. Tier 2 covers mid-income markets, and Tier 3 the large, lower-income markets where clicks are plentiful and cheap. Each network draws the lines a little differently.
The ranking exists because both prices in the arbitrage trade follow it. Advertisers bid more for a searcher in a Tier 1 country, so RPC is higher there; other buyers want those same people, so CPC is higher too. Lower tiers offer tiny costs and tiny revenues.
Neither end is automatically better. Tier 1 offers bigger absolute spreads and deeper advertiser demand but fiercer competition and costlier mistakes. Lower tiers are cheap to test but have thinner coverage (fewer ads to show) and a small error in cost wipes out the margin. What matters is the ratio, not the tier.
An example
For illustration: a Tier 1 visit might cost $0.30 and earn $0.39, a $0.09 spread and 30% ROI. A Tier 3 visit might cost $0.010 and earn $0.013, the same 30%, but it takes 30 times the visits to make the same profit.
Related terms
Geo-targeting
Geo-targeting is restricting an ad campaign to people in chosen countries, regions or cities, and excluding everyone else.
RPC (revenue per click)
RPC is the average revenue earned per monetised (paid ad) click: the "sell" price in search arbitrage. Convert it to revenue per visitor (RPV) before comparing it with CPC.
CPC (cost per click)
CPC is the price paid for one click on an ad; in search arbitrage it is what the arbitrageur pays a traffic source for each visitor.
Coverage (ad coverage)
Coverage is the percentage of ad requests for which the search feed returns at least one ad.
Vertical
A vertical is a subject area or industry, such as insurance, travel or home improvement, that a set of ads and keywords belongs to.
The spread (margin)
The spread is the gap between what an arbitrageur earns from a visitor and what that visitor cost to buy.