Performance Based SEO Payment Model Will Kill The Conventional SEO Companies
By Igor Mordkovich on Oct 24, 2006 in Marketing Strategy, General, SEO
How will changing the way SEOs get paid effect the search industry? We know the “good ones” won’t guarantee us anything … and maybe they are taking advantage of it? A new SEO payment model might just change that for the better.
Shimon Sandler wrote about a performance based pay for SEOs instead of a standard monthly fee and other fees out there. Take a look at the #3. It suggests that SEOs should charge a small (barely surviving) fee and rely on how well they perform. Based on the ranking reached … monthly SEO fee will increase.
I think that model #3 is very interesting as it creates a performance / payout tier. Now companies can be “rest assured” that the SEO companies will most likely try to waste as little time as possible in order to increase their monthly allowance. 
I would be interested in working with such an SEO.
The only problem is… not many industries will allow such control over rankings. What if you have to optimize a website in a very difficult and competitive field? It can take 8+ months even for an established site to come anywhere close to Top 10 results on Google?
The model is pretty good but it won’t work for every business. It will however generate more clients for an innovative SEO group that knows what it’s doing.
Think about it … no more of these.
Sir … any SEO who will guarantee you top 10 rankings is a liar! Here are 200 authority sites that will agree with me. Others are the devils and our SEO company that will not guarantee anything is the best. Just give us money and rely on our reputation. ……… (pssst to themselves … we have absolutely no reason to hurry this thing up …. well as long as it doesn’t get too out of hand)
Another issue to think about is … the long tail. Optimizing for just 3 (2-word) keywords can lead to good rankings for a broad search … how do you get paid for that?
We’re in a stage where SEO value and pay is still being figured out. Let’s not forget … what was SEO 10 years ago?
When people pay for services they can’t rely on a “promise” or maybe a light at the end of the tunnel (it can be a train moving towards them). This is why SEO service spending is still very far apart from PPC spending. I wrote about the problem of SEOs being underpaid and this is the reason why.
In order for SEOs to get more money out of companies they need to re-think and hopefully restructure their payment structure.
I’m open to the ideas of the SEOs receiving a healthy bonus based on performance, but here are the problems with strictly performance based SEO (or even a payment structure that barely covers expenses up front).
The SEO is 100% at the mercy of the site owner. If the SEO busts their butt to optimize a site and the client comes in behind them and 1) overwrites the file, 2) says they don’t like something, 3) redesigns their site, 4) implements significant edits, 5) won’t implement necessary changes, 6) can’t implement necessary changes, or any number of other things, SEO may not work, or many not be as effective as it could/should. This means the SEO busts their butt for little or no payoff for them.
I’ve been in this situation before. Made an agreement for pay based on performance (a percentage of sales brought in.) About three months into the agreement the client decided to change their backend system that was completely un-seo friendly. In fact, it was unworkable from an SEO standpoint. All the work we put was for naught.
The only way such an agreement works is if 1) the SEO has total authority over the site 2) the SEO has veto/approval power over any other marketing campaigns 3) there is not only a minimum contracted period (say, 3 years) but the SEO must also continue to receive payment for an additional three years beyond the point that the client stops using their services.
St0n3y | Oct 24, 2006 | Reply
Stoney, I agree that many companies if not all do one of those 6 things you mentioned.
Having said that I think that SEO companies must structure their payment plan in such a way that the customer understands that there is an incentive for an SEO to do good (other than keeping the account).
Bonus is a great idea. I say those that charge $3,000 / mo can restructure their service fee to $1,000 /mo and add on the bonuses that will come for performance.
If a client is OK with paying $5,000 /mo for a promise I am sure they’d be delighted to pay $7,000 / mo for real results. So if an SEO is “good” he can start off by cutting his/her fees by 70% and implementing a bonus system.
I want to see SEO firms that can rely on their previous experience and comply with a BONUS system.
Cute reports and promises won’t earn them a hefty bonus … results will.
Igor Mordkovich | Oct 24, 2006 | Reply
Good luck to Shimon, I hope he really doesn’t expect to stay in business that way. Like St0n3y says, one change by the site owner and you’re toast. And forget about rankings all together, believe me that’s no way to measure success. If all you want is rankings go ppc, that’s the point. It’s all about conversions and that usually means the owner has to give you total control. Do you really think the seo firms that are making money doing this are going to change their business model? Yes maybe those that are floundering but by then it’s too late.
David Temple | Oct 26, 2006 | Reply
David … do you think there could be another payment model for SEO other than “on promise”?
What would you come up with (performance based) that would work for SEOs as well as the client?
Igor Mordkovich | Oct 27, 2006 | Reply
Igor, this is an interesting topic of discussion and I hope to see more input. Stoney wrote a great article about this back in 2005 and it was discussed at SES this August by Greg Boser, who thinks it the way of the future, and others.
I do think that a performance based payment model would work if, as Stoney said, the seo firm had complete control over the site. If traffic is the only indicator of performance then perhaps a cost per click model would work. But like you say organic listings are way more valuable then sponsored ones. That’s why I believe PPC is so popular.
On the other hand if the key performance indicators are leads or sales, then usability, copywriting and other factors come into play. In that case total control is essential and pricing could in fact be based on performance. In any case a long term agreement seems to be the way to go.
David Temple | Oct 27, 2006 | Reply
David … very well put.
I don’t think that SEO can rely on the “conversion rate” as this would involve usability, content, design, product, etc. Too many things that SEOs usually don’t do.
Having said that, I do think that those SEO companies that come up with a “performance based” partial pay, will have more success winning clients.
Igor Mordkovich | Oct 28, 2006 | Reply
“…as this would involve usability, content, design, product, etc. Too many things that SEOs usually don’t do.”
I think good SEOs are involved in those things, some more than others. SEO without usability and a close eye on content and design is dead. But its still up to the client to implement the SEOs recommendations.
Stoney deGeyter | Oct 30, 2006 | Reply
Stoney, 5% of SEOs who care about conversion are gold. It seems as if you might be in those 5%.
You see … conversion rate does not only depend on content (that SEOs suggest) and usability. It also depends on the visual, product, price, reputation (branding), competition, customer service … heck, you know this stuff, you don’t need this list…
What I am saying is that, SEO can not be paid solely on a “conversion rate basis”. Traffic from natural search…? Yep, that will work.
Igor Mordkovich | Oct 30, 2006 | Reply
I agree. Even those of us SEOs that do care about conversions, we are still at the mercy of the client. But the same is true with traffic as well. Not only that, but basing pay purely on traffic alone is a set-up for abuse. I can easily force tons of traffic to a site, traffic that is largely meaningless to the client but it would still get me paid. Since conversions are the only thing that really matters, that’s the only that that makes sense from a pay-for-performance standpoint. But since that’s largely unfeasible, PFP is simply a model that I don’t see as workable. Though I’m open to be proven wrong.
Stoney deGeyter | Oct 31, 2006 | Reply
I meant natural traffic from relevant keywords, etc.
I remember when people would ask only for “unique traffic” and that’s all they’d care about … so these marketing companies would just purchase Pop up advertising and get these people 30,000 unique visitors within 3 weeks.
No sales … but the advertiser was happy to see those 30,000 “unique” visitors who saw the site … (even if it was 1 second before they’d shoot down that pop up)
P.S. By the way … Pop up advertising is how many companies, including Netflix built their business. That’s how I learned about them.
Igor Mordkovich | Nov 1, 2006 | Reply
So now we’re talking about analyzing the server logs and only counting “clicks” that come from certain keywords? hmmm… an interesting thought.
Stoney deGeyter | Nov 1, 2006 | Reply
Stoney … a simple report can do the job.
This can go on forever
Let’s pick up at the conference.
Igor Mordkovich | Nov 1, 2006 | Reply
Is any here using a PFP SEO business model?
I would love give an example.
I’m having trouble measuring my client’s leads, traffic, and sales.
Warmly,
JP
JP | Jan 15, 2007 | Reply
JP it’s a common problem (measuring sales and getting paid by the growth). Companies don’t like to share that data, especially with the “SEO”.
I do feel that SEO companies would be able to make much more money if they adopted the PFP model. Problem is … we need to find a good way to implement this.
Igor Mordkovich | Jan 16, 2007 | Reply
“Problem is … we need to find a good way to implement this.”
I’m on a search to find the model because I have a great potential client, but they want pay for performance SEO.
Basically the model is:
Small Base + Pay for Page views + Sales = SEO Revenue
My challenge is calculating what Page views and sales come SEO.
Igor do you know of any SEO company out there with a working PFP model?
Warmly,
JP
JP | Jan 16, 2007 | Reply
P.S. With your quick reply to my comments Igor, your blog has earned a spot on my Google Homepage… Oh, the honor
JP | Jan 16, 2007 | Reply
Igor Mordkovich | Jan 16, 2007 | Reply
I have tried several SEO bonus structures and they all worked. My team knows what we are doing considering we optimized CondiNets sites and many others. For the past few months we have been working on about 4 pricing models and have found one that works hands down. Some of the biggest e tailers want our help because they understand the traffic we can bring them. Our contract protects both client and us and works for everyone. One client we have will potentialy pay us $5-$10 million a year for our service. The new model will be announced once we have closed a few other deals with the same terms. As a side note we have signed 4 contracts in the past month using this strategy.
Mayer | Aug 15, 2007 | Reply
I have been looking for a performance based SEO/PPC company for a while. Do any yopu all handle this type of work
Shawn | Nov 28, 2007 | Reply