Adsense is an advertising program run by Google for publishers. Publishers who choose to enroll in this program will get to display text, image and more recently video ads on their websites in return for a share of the advertising revenue. Earnings are calculated based on per click. Every visitor to your site who clicks on any of these ads will earn you a percentage of the revenue from that particular ad.

For Google Adwords, it’s a Pay Per Click (PPC) advertising program for advertisers who want to promote their products, services and websites. Advertisers bid for the keywords that should show their ads and indicate the cost they are willing to pay per click. For example let’s say an advertiser pays Google $1 for an ad, whenever someone clicks on the ad, the advertiser will have to pay Google $1 for that click. The $1 will then be share between Google and the publisher’s whose site displays the clicked ad.

So how does Adsense arbitrage comes in?

Arbitrage means buy high sell low and it is the underlaying principal behind Adsense arbitrage. Basically, it involves the setting up a MFA (Made For Adsense) web site that is fully optimized for Google Adsense ads. After setting up the site, what you do is to bid a low price for keywords in advertising programs like Adwords and drive traffic to your Adsense optimized sites to click on higher paying clicks. For a simple illustration, let’s say you bid $1 for the keyword "car" and direct the traffic to your website fully optimized with related Google Adsense ads paying you $2 per click. In other words, you make $1 for every every click.

The simple illustration above is not representative of how Adsense arbitrage works in general. In fact Adsense arbitrage is more complex than that. Many people lose huge sums of money on Adsense arbitrage after reading misleading information from eBooks or elsewhere online. Google is also clamping down hard on MFA sites making it harder for people to profit from just setting up MFA sites. But there are still many ways to profit from Adsense without resorting to MFA sites.