What is Digital Arbitrage: 3 Examples of Digital Arbitrage

Digital Arbitrage

Since the explosion of the internet in the mid-1990s, more and more companies have started to use the web to take advantage of arbitrage opportunities.

Without getting too technical, arbitrage in this sense is typically taking advantage of a price discrepancy.

A product may be available somewhere at a very low price, and an arbitrager would seize upon this opportunity to buy low and sell high somewhere else.

Many companies will only purchase a product when they have their buyer already in place, taking on virtually no risk or financial investment.

These types of business tactics are as old as money itself, with traders taking advantage of these basic principles for as long as can be remembered, but the digital age has exponentially increased the number of these opportunities.

With so much commerce happening online, and the number of people connected in a digital online global marketplace increasing every day, there are a surprising number of ways to buy something cheap and sell it for a profit, and sometimes it is not even a physical product.

Here are a few examples of the digital arbitrage that a growing number of businesses are conducting today.

Capitalize on Connections

Consumers surfing the web are often called traffic in the internet industry. Right now, you are traffic that has stopped on this website to read this page, and where you go next is a sought-after commodity on the internet.

Being able to drive traffic from one site to another, or one page to another can often create a pay-per-click opportunity for a company.

Native advertising in websites is often used by companies like CNN, NBC, Fox, and other media companies to offer their goods and services to their online consumers as a part of their content.

There are many small independent companies that offer similar content for smaller companies, and many sites will now offer their consumers native advertising to drive traffic from one place to another.

Bring People Value

Many successful websites are offering people exclusive deals or free products as a way of bringing new customers to a company, and again driving traffic to websites.

It is possible to make money from sharing free product samples with consumers. Businesses do this by receiving a fee from the product manufacturer or website for bringing them a customer.

These websites might even engage in profit sharing agreements with manufacturers, receiving a percentage of the sales a manufacturer gets from a customer they have delivered to them.

Buy Low, Sell High

With all the products available on the internet, and all the millions of suppliers online, it is often possible for the right deal to be missed by a potential customer.

Sometimes astonishingly cheap deals can hit the web for short periods of time, and the perfect prospective consumers are not ready to make the purchase.

A savvy and quick-thinking internet entrepreneur can make some very fast money from digital arbitrage by exploiting a sudden price drop in a product online and buying up the stock to sell when a buyer is ready.

This very basic business principle has helped middlemen and third-parties find their fortunes in all kinds of markets, like currency exchanges and commodity markets, for centuries, and the digital age is no different.

There is no such thing as easy money, and even with the help of high-speed internet connections and super-fast computers, you are still going to have to work hard to make money from digital arbitrage.

However, by taking the right opportunity at the right time, fortunes can be made online by any savvy entrepreneur.

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