Forum Moderators: martinibuster
The payment and billing cycles of adwords and adsense are such that you get paid your revenue some period AFTER you have to pay for ads, if you are doing arbitrage. Are any of you looking at the risk, and what will happen if your adsense account is cancelled, you lose your rev. but you paid for the traffic?
Same applies to any arbitrage combo (e.g. YPN/adsense, MSN/adsense)
Similar question re: affiliates. Affiliate payment terms tend to be worse than adsense. How to you plan for the possibility that the affiliate program you advertise for might not pay you?
As for not getting paid by affiliate partners, I've had that happen a couple of times since I launched my current site in October, 2001. I haven't lost much since neither program generated much revenue. I'd be pretty unhappy if any of my larger partners went broke, but I don't think that's too likely to happen. They're leaders in their industries, and I've been working with them for several years without problems. (If any of them did go broke or simply gave me the finger instead of a check, I'd lose a fair-size chunk of income, but I wouldn't be out of business, and I doubt if I'd have any trouble finding new partners.)
I don't do arbitrage, so I won't comment on that. You brig up an interesting point, though--one that a lot of wannabe click arbitrageurs may not have thought of.As for not getting paid by affiliate partners, I've had that happen a couple of times since I launched my current site in October, 2001. I haven't lost much since neither program generated much revenue. I'd be pretty unhappy if any of my larger partners went broke, but I don't think that's too likely to happen. They're leaders in their industries, and I've been working with them for several years without problems. (If any of them did go broke or simply gave me the finger instead of a check, I'd lose a fair-size chunk of income, but I wouldn't be out of business, and I doubt if I'd have any trouble finding new partners.)
It would seem to me that the MFA sites would have fairly signficant risk exposure. On the affiliate side, one reason I've been thinking about this, is that having followed the affiliate business, at least via some of the major brokers (like commission junction), is that reliability of payment is somewhat questionable, particularly since some of these companies seem to "protect" the merchants over the publishers.
Anyway, it's the MFA sites I'm quite interested in, particularly the "big" ones that are into almost every term on the planet, have no content and are thus in TOS violation, and have to be spending some major money on ads to get their other ads clicked.
I don't imagine many adsensers here will admit to running MFA's and share their risk management approach, but I figured it was worth a shot.
arbitrage sounds the same as any other business model...So I guess you could ask the same question to any other entrepreneur.
True, but Rbacal's question may be of special interest right now in light of changes on the AdWords side, where the new landing-page quality scores apparently have hit some arbitrageurs fairly hard.
The way you describe it, arbitrage sounds the same as any other business model: you first do the job and only after that you get paid. So I guess you could ask the same question to any other entrepreneur. I guess the answer is simple; it's all in the game.
There's a lot of differences that make a huge difference. First, even if I rely on one source of revenue, I can protect myself signicantly through the contracting process. That's absent in adsense, since there are no protections available contractually. I protect myself this way all the time.
Second, there's no inventory. When you buy through adwords/MSN/yahoo, you buy traffic. You got what you paid for. You paid for it. And now, what if you can't get anything back for your "investment". You can't resell that traffic like you can a commmodity.
Further on the contracts. I'm needing to have my roof repaired. I guarantee you that no contractor is going to be "on the hook" for the materials bought upfront. The payment terms will provide the contractor with some protection if I bug out on them.
Anyway, to give an example: best12bozosites pays 100,000 per month for their traffic expecting (provided things don't change) to receive $120.000 in adsense revenue. They pay that money way before they actually know they will receive anything from adsense. Adsense decides to enforce its existing TOS (no MFA's) and says: You broke the rules. We're not paying you. So, the bozos are out the 100,000 they paid -- out of pocket, have nothing in return at all.
It seems to be a very risky approach to me. Any ideas on whether these MFA's simply don't worry about this, or just don't care about the risk?
(there lots of other flavors or risk, both short and long term that are inherent in any business. There's always significant risk involved in sole sourcing your advertising or your revenue (although even non-internet businesses sometimes do that). But the risk I'm talking about is straight out of your pocket loss of real dollars you paid out, not potential money or earnings. Potential money or earnings is different.)
Still, they risk losing 1-2 months of PPC cost should anything go wrong, but I believe they have already made enough to more than cover the loss.
You mention some interesting points here, but I think they mostly apply to relatively large companies and traditional businesses that sell stuff you can put in a box. Most entrepreneurs I know have other kinds of businesses.
I can protect myself signicantly through the contracting process. That's absent in adsense
I agree. But most entrepreneurs I know have small businesses and can only take small orders. Therefore their customers do not wish to spend too much time on the contracting process. I know people who run their own business in the transport, design, consulting and entertainment industry. They are just asked to do a job. A job takes 10 hours or perhaps 100 hours. When the job is done they send the bill. There is no contract. So when they don't get paid for whatever reason, it's bye bye cash.
Second, there's no inventory.
The same thing. The people I know don't have any inventory. Their labor is their inventory. If they do a job and don't get paid, the inventory is no more.
But the risk I'm talking about is straight out of your pocket loss of real dollars you paid out, not potential money or earnings. Potential money or earnings is different.
I agree, but if I have my little consultancy firm and I spend 100 hours to write some report for a customer, and that customer doesn't pay, that's about the same as the loss of real cash.
I didn't mean to say that arbitrage does not involve risks, I think it is a very risky business, but some of these risks are not so much different from the risks that other business models involve.
Any ideas on whether these MFA's simply don't worry about this, or just don't care about the risk?
Most just don't understand.
Running an arbitrage business must require specialst skills, a lot of hard work, steel nerves and very deep pockets.
Luckily for Adsense publishers, many folks believe arbitrage is an easy way to make money. They step into it, lose a lot of cash and then they leave again. That cash mainly goes to us. Therefore I am less of an MFA basher than many others on the forum. As long as the ads on my pages are not illegal or offensive, I am happy to take the cash!
