Imagine you buy ad space on a website for $1 per thousand impressions (CPM), and you generate traffic to that website through social media or search engines. When people visit the site and see the ads, you earn revenue from ad clicks or impressions, say $3 per thousand impressions.
In this scenario, you’re making a profit of $2 per thousand impressions because you’re paying $1 for the ad space but earning $3 from the ads displayed there. This difference is your profit margin, and ad arbitrage involves scaling this process to generate significant revenue.
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