Arbitrage is the idea that you can make money through the difference between two prices.

Adsense arbitrage works by paying for clicks through PPC advertising, and then converting those visitors into Adsense earnings on high paying keywords. You would typically do this by using PPC advertising to send targeted visitors to a landing page that had Adsense ads on it. In this case you don’t really care about using the landing page to presell a product, but rather to provide enough content to form a framework to pull in Adsense ads for the keywords you’re targeting.

There’s a great post at Greywolf’s SEO Blog about Adsense arbitrage that goes into detail about the process.

Note that you don’t need to use Adsense specifically. Any way of placing ads on a landing page works just as well.

Another form of arbitrage is sports betting arbitrage. In this form, you place bets with online book makers on various sporting events. Each book maker will have slightly different odds, and you’re looking for a difference in odds that allows you to bet both sides of the event and make a profit no matter who wins. The typical sales pitch for websites that will identify sports arbitrage opportunities for you (for a fee, of course) is that you cannot lose.

While that’s technically true, you also have to keep track of the various fees that mount up. Some book makers charge you a fee every time you transfer money into your account with them. You’ll also be paying a fee to the website that’s showing you the opportunities. There may be currency conversion fees, depending on where you and the book maker are located. Make sure that you understand all the fees involved before trying to get into this sort of arbitrage, as they can eat through your profits if you’re not careful.

The Sports Arbitrage Review Site is an excellent site detailing one man’s retirement career in the field. He shares how much he’s made, and warns about related scams on the net. He also reviews websites that provide sports arbitrage opportunties and rates them, so be sure to take a look if you have any thoughts about getting into this field.

With any sort of arbitrage, you make your money in the gap between the two prices. You either need a large gap, or high volume, to make any serious money. Large gaps generally don’t happen that often, so you end up trying to make up for it in the number of transactions.

Arbitrage works any time there’s a gap of some sort. For example, currency arbitrage takes advantage of differences in the conversion rates between different currencies in different regions of the world.

What other sorts of arbitrage opportunities can you think of?

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