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Don’t Ask About Arbitrage

October 28, 2012

From MediaPost

Ask about Arbitrage

Google’s policies on Arbitrage ruffled a few feathers in Oakland, Calif. after Ask.com CEO Doug Leeds said rumors began spreading across the Internet that the Q&A site committed arbitrage.

Google’s policy describes arbitrage as when advertisers use AdWords to drive traffic to their Web sites at a low cost, and pay for traffic by earning money from the ads placed on those Web sites. The rules state a Web site may get suspended if it has excessive advertising or designed for the sole or primary purpose of showing ads.

“Arbitrage means you’re trying to get a click and send the user to an app or site with a bunch of ads,” Leeds said. “That’s not what we’re about.”

Leeds told MediaPost that Ask.com offers something a little different than traditional search engine query results. It offers an information service supported by content and monetized with ads to drive traffic. He believes the explanation on Search Engine Land prompted by a SEL reader jumps to conclusions because of the recent change in the company’s content business model.

Ironically, Google’s mantra has been for marketers to create ads that answer customers’ questions in queries.

Google declined to comment on the situation. “In general, we don’t comment on specific advertisers or ads,” said a Google spokesperson. “We’re constantly reviewing and updating our policies, and search partners are subject to these policies.”

Leeds said alienating users with a short-term arbitrage play is not what the company is about, adding that the company has been working with Google to ensure compliance.

The strategy is working. Leeds said daily queries rose Oct. 24 by 25% year-to-date, because site visitors get answers to the questions they seek, so they come back. Mobile query growth rose 45% in Q3 2012 compared with the year-ago quarter. And the company has seen 69% year-to-date page-view growth in Ask’s Q&A community.

In September, Ask.com held 3.5% of search market share — up from 3.2% sequentially, according to comScore.

Piper Jaffray Analyst Gene Munster said the search business at InteractiveCorp “could demonstrate a clearer growth opportunity in mobile, particularly in search.” Based on certain acquisitions and improvements in the company’s strategy, Munster estimates 11% growth in the company’s search business in 2014.

Growth continues from investments in acquisitions, such as About.com, as well as branding campaigns. Next week, Ask will launch two new spots as part of its national cinema campaign with National CineMedia, which began in July 2012 across 40,000 screens nationally.

The branding campaign illustrates Ask’s investment in marketing, which contradicts the definition of an arbitrage business. Arbitragers don’t spend money in offline brand awareness.

Read more: http://www.mediapost.com/publications/article/186043/ask-arbitrage-doesnt-exist-in-the-growth-strateg.html#ixzz2AdbpjdQw

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