[sounddust]

While I agree that search arbitrage can be good to smooth out imbalances in CPC prices, I also believe that it does Amazon more harm than good to pay people who participate in arbitrage.

In the best case scenario (bidding against an affiliate who is good at arbitrage), Amazon probably breaks even because they get good sales from those affiliates with whom they're competing for keywords.

But in the worst case scenario, Amazon is competing against their affiliates who are bad at arbitrage (people who are losing money) and are blocking Amazon from winning CPC bids without actually effectively converting those clicks to commissions.

And I would bet that there are far more people losing money to arbitrage (amateurs who bought some ebook from a spammer about how to make money on the internet) than people who are profiting.

The net result is that google and yahoo get more money.