Berk Sure Has A Way

Putting my mouth where my money is.

More Marchex Arbitraging

with 3 comments

I sent my traffic arbitrage post to folks at Yahoo and Google. It looks like the two examples I blogged about were removed from Google – I wonder if they found others.

After my blog post about Marchex’s arbitraging, additional examples were sent to me by another investor. Some of the ads were relevant to the queries below are relevant, others not. One example for “cups online” that takes the user to lensoutlet domain:


Additional examples:

“Endoscopic” has an ad for

“Job Information” has an ad for

“Flight attendant” has an ad for

“Atlanta jobs”, “Boston jobs”, “New York Jobs” has ads for, sometimes (ad on the “more sponsored results” pages)

“Practice GED” has an ad for

“High School” has an ad for (ad on the “more sponsored results” pages)

“Plastic surgery” has an ad for

In addition here is a trick to find more examples on Google partners:

1) Search for one of their domains with the following
format on Google:
+”” +ads +by
+google +search
2) Click on a cache link next to a result
3) Find the highlight text on the page with the URL
4) Notice the query that caused the ad to be served – many times it is not relevant

Other examples you can use in the same format


You will notice that while some of the queries that spawned these ads were somewhat relevant, many are not.

Should Google or Yahoo care about this recycled traffic? After all, YHOO, GOOG, MCHX all win in these situations because they all get paid. Users of Google search and Google’s partner sites lose because they are inconvenienced if they are taken to a place that doesn’t make sense to them – another page of paid links. The real loser may be Yahoo’s advertisers. If the traffic is not relevant, then their high priced ads won’t convert to customers.

I don’t know what Yahoo and Google plan to do, but if I were responsible for it, I would probably be doing a lot of investigating.

From Google’s perspective, I would: 

  • Take down the ads as I find them
  • Investigate the other ads in same account to see if they are “real” sites and not paid link pages
  • Search through all the accounts to find other Marchex domains to see if they have multiple accounts arbitraging at once

From Yahoo’s perspective, I would:

  • Investigate the sources of traffic that Marchex provides via web logs, query logs, etc.
  • Evaluate conversion tracking trends for Marchex’s pages over time as well as versus other more organic traffic on for the same keywords
  • Check Marchex’s contract and the Yahoo terms of service to see if this is prohibited
  • Convene the Marchex account team to determine how to deal with it
  • Ask Marchex to outline how widespread this is and to send over their traffic logs that might help fill in the gaps – who knows they might undercover other sketchy traffic sources

Back to the numbers. Who knows how much MCHX has spent arbitraging, but it is clear they are spending more on sales and marketing. Sales and marketing expenses have were $1.32 mil in Q1, $1.54 mil in Q2, and $2.76 mil in Q3. That’s a 79% increase. I wonder where that money is going.

I own puts on MCHX shares at various prices.


Written by Kevin Berk

December 2, 2005 at 12:33 AM

Posted in Picks and Pans

3 Responses

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  1. This makes for a very compelling case for this whole segment.
    What then are your basic thoughts on companies that occupy the layer of a ValueClick for instance ?


    December 4, 2005 at 6:11 PM

  2. I think the domains business is a good business but a slow growth business prone to sketchy behavior.
    VCLK has some good assets but is probably fully or overvalued in my opinion.

    Kevin Berk

    December 5, 2005 at 11:22 PM

  3. Marchex goes much higher stop the hating it will be bad for your puts.

    Jim Cramer

    December 7, 2005 at 11:47 PM

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