Monday, July 17, 2006 » Blog Archive », Shopzilla, and NexTag BEWARE of Google Checkout : CSE's - BEWARE of Google Checkout:

The complex online-traffic arbitrage game

To get traffic, online merchants pay listing fees to the CSEs and per-click fees for higher rankings.

Comparison Shopping Engine's (CSEs) pay Google for SEO traffic, then must convert that traffic to clicks to their merchants.

Large merchants also bid on Adwords, so they also drive up the advertising costs for the CSEs.

CSE's are also run Adsense ads, so they also get paid by Google (or rather its advertisers - usually, the same merchants).

To put this in context, follow the money :
1. Merchants have an ad budget.
2. This money goes to a) Adwords b) CSE c) Adsense
3. The CSE money also goes to Adwords.

Thus merchants are paying money to the agents, to compete
against themselves and drive up their advertising costs. At the moment, with current CPC rates, this is still better than paying for print/TV advertising. However, eventually, at some CPC rate, the economics will self-stabilize (at a macro-level).


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