Who is who in the chain

One click in search arbitrage touches six parties. Each has a different goal, and most of the arguments in this industry happen because those goals pull in different directions. Once you know the cast, the news about policy changes and lost contracts starts to make sense.

Think of a wholesale fruit market. A farmer grows the fruit. A big wholesaler buys it and sets the price. A distributor holds the wholesaler's licence and supplies smaller stalls. The stallholder pays for a pitch in a busy street. Shoppers walk past. The farmer never meets the stallholder, yet the farmer's money pays everyone in between.

1. The advertiser: where all the money starts

An advertiser is a business that wants customers: an insurer, a solar installer, a software company. It bids on a keyword in Google Ads or Microsoft Advertising and pays only when someone clicks. This model is PPC, pay per click. The advertiser usually has no idea its ad appeared on an arbitrage page. It simply ticked, or left ticked, a setting that lets ads run on the search engine's partner sites, the search partner network.

2. The search engine: the wholesaler

Google, Microsoft (Bing) and Yahoo run the auctions, hold the advertiser relationships and collect the money. They also decide which outside websites may show their ads and on what terms. What they pay those partners is known in their accounts as TAC, traffic acquisition cost. Alphabet's annual report explains that most of the advertiser revenue from ads on partner properties is paid out to those partners, which is why the rate is far higher there than on Google's own search pages.

3. The feed provider: the licensed distributor

Search engines sign direct contracts with only a limited number of companies. A feed provider, also called a syndication partner, holds one of those contracts and lets smaller publishers use it in exchange for a cut. Well-known names include System1, Tonic, Sedo, Ads.com, Perion's CodeFuel and Media.net. The provider is responsible to the search engine for everything its sub-publishers do, so it polices them, sometimes harshly.

4. The arbitrageur: the stallholder

This is the publisher or media buyer who builds the pages, writes the ads, buys the traffic and carries the risk. Some are one person with a laptop; some are companies with hundreds of staff. A few are large enough to hold a direct feed from the search engine. Most work through a provider on a hosted feed, where the provider also supplies the page templates.

5. The traffic source: the busy street

A traffic source is any platform that sells visitors: Meta, TikTok, Snapchat, Pinterest, native networks such as Taboola and Outbrain, push and pop networks, and Google's own ad products. They are paid whether or not the arbitrageur makes a profit. Each has its own advertising rules, and each can close an advertiser's account.

6. The user: the person who actually clicks

Everything depends on a real person with a real need. If the user wanted roofing quotes and found a roofer, the system worked. If the user was misled by the ad, or was not a person at all, every party above eventually pays for it.

1. Advertisers bid at the search engines: An Advertiser sets up keyword campaigns in Google Ads or Microsoft Advertising. Almost all the money in search arbitrage starts in these few advertising systems. Yahoo’s search ads have for years been supplied largely through Microsoft.
2. Engines lend their ads out: Search engines also show those ads on other companies’ sites. This is search syndication, and the sites together form a search partner network. Think of a wholesaler stocking many small shops.
3. The feed provider holds the contract: A direct feed is a contract with the engine itself. Few companies have one. A feed provider (or syndication partner) does, and is answerable to the engine for everything shown under its account.
4. Sub-publishers plug in: The provider gives approved publishers a hosted feed in return for a share of revenue. Each publisher, site or campaign is tagged with a channel ID so the provider and the engine can see whose traffic is whose.
5. The ad reaches a visitor: The sub-publisher brings visitors, usually with paid traffic, and the engine’s ads appear on its results pages. The visitor rarely knows four companies stand between them and the advertiser.
6. Money flows back up the chain: A click charges the advertiser, say, $1.00. In our example the engine passes $0.70 to the provider, and the provider passes $0.56 to the sub-publisher. Each hop is a toll booth.
7. Responsibility flows down it: The engine audits clicks and pages across the chain. One sub-publisher with bad traffic can put the provider’s whole contract at risk, so providers police feed approval, traffic sources and volumes closely.

Who pays whom

An illustrative dollar

To see how a single payment splits, take a made-up example. An advertiser pays 1 dollar for a click. Say the search engine keeps 30 cents and passes 70 cents to the feed provider. Say the provider keeps 20% of that, 14 cents, and pays the arbitrageur 56 cents. The arbitrageur had already paid the traffic source 40 cents for the visitors that produced this click, leaving 16 cents before overheads. The real percentages are confidential and vary by contract, but the shape is typical: the party taking the most risk often keeps the thinnest slice.

Where interests collide

• Advertiser versus arbitrageur. The advertiser wants buyers; the arbitrageur is paid for clicks. If clicks do not convert, the advertiser feels cheated.
• Search engine versus feed provider. The engine wants reach but is blamed for bad partners, so it tightens rules and caps volume.
• Traffic source versus arbitrageur. Platforms like the spend but dislike ads that annoy their users, so they reject creatives and ban accounts.