As a commercial competitor, I seek to understand my markets. If I can understand what the market is doing, I can position myself and my clients profitably. If I can understand how the market reacts, I can interpret my competitor’s activities in light of their likely performance in the market. In other words, I can compete.
A very long time ago I got into a discussion with my father about how deals are made, and how prices are set during negotiations. My father was a civil engineer working with large businesses and governments, and I was a computer networking consultant building and repairing systems for customers. I postured that the party with more information could allow the other party to set the price, providing guidance if the initial price point represented inadequate profits. In this manner, the less knowledgeable party would have to expose his value position, and thus indicate the “reasonable price” he would ultimately be willing to pay for the transaction. The more knowledgeable party had the advantage, clearly, but the important point for me was that in that marketplace it was not supply and demand nor value that set the price. The two parties did not check the offer price against a market price, but rather one-sided perceived value. And the perception of value was defined by the accessibility of information. A smart, more knowledgeable party in the transaction could afford to incentivize the deal for quick closure, as a means of preventing the less-knowledgeable party from learning more, fast enough to impact the price. I’ll offer this price, if you agree today. Otherwise, the price will go higher.
My father felt the price would be found via discussions based on value. Obviously we worked in quite different industries. Technology moved so fast, getting better/cheaper/faster while construction was old-skool, with large multi-year contracts, government regulation, and various forms of large scale collusion behind the scenes.
I recently read Bruce Schneier’s commentary on how the computer security industry suffers under a situation of consumer ignorance. I see mis-information as a core problem for the SEO industry. There is so much so-called SEO out there, mostly outdated, baseless, or downright wrong, that the accessible information is more wrong than right. A Google or Yahoo! search on SEO topics is ridiculous, for many reasons. Often accurate SEO information is considered trade secret by knowledge consultants, and thus is not very accessible. What appears in front of the inquisitive SEO consumer is mostly junk. This puts the prospective SEO client at a distinct disadvantage, and provides an opportunity for the contract-seeking “snake oil SEO salesman” to close a deal at a good profit, often without realistic accountability or other consumer safeguards in place. But, as the 2001 Nobel Prize winning economist George Akerlof showed in his famous paper “A Market for Lemons”, asymmetrical information does much more than that. It actual can destroy the market for true, quality SEO.
Akerlof analyzed the used car market, showing that the information disparity surrounding the value of a used car led to a collapse of the market as a used car market, creating instead a “market for lemons”. The used car salesman knew how good (or bad) a used car really was. The buyer could not determine that until after the car was purchased. Because of this “information asymmetry” in the used car market, used car salesmen could overprice “lemons” – the low value used cars that looked ok. Poor quality cars no longer priced as poor quality. Actually good used cars became too expensive for buyers to chance, as poor quality cars at middle-quality prices presented better perceived value and higher profits for salesmen. As non-selling good cars were removed from the market, masquerading “lemons” dominated, setting the tone for the used car market, and further blocking actually good used cars from appearing. In the end, the used car market becomes a market for lemons, not a used car market.
It seems SEO has the same problem. As “boiler-room” SEO firms cold-call companies and pitch ridiculously low prices for SEO contracts, based on old and incorrect SEO information readily accessible to consumers, high quality SEO firms start looking “too expensive”. Consumer research into SEO does not reveal better information, since that knowledge comprises a significant portion of the value SEO consulting, and is thus not freely published. The entire market for SEO services starts to become a market not for actual search engine optimization, but more a market for “snake oil SEO” than true SEO. The typical seeker of SEO services these days seems ready to sign a one year contract with little if any performance basis. I can only presume they are buying based on looks, flashy presentations, or perhaps on gut instinct after a personal interaction with the salesman. I suppose we can expect SEO firms to start hiring pretty women and smart dressing, friendly “SEOs” instead of the geeks that actually understand search engine optimization. For a service designed to achieve rankings in search results, that seems very very odd. SEO has a measurable outcomes. Unlike a used car, SEO is a service. Nobody has to sign an SEO contract that does not include a 3 or 6 months performance evaluation with hard metrics of success and a cancellation clause.
We SEOs can learn a lot from Akerlof’s paper, but that might not be enough to save the SEO market. I already see that tech-savvy seekers of SEO skip right past the fluff and ask for short term or no term engagements, performance metrics, and accountability. The price pressures are still an issue, though, because quality SEO services are difficult to find and costly to develop. Without the financial support of longer term contracts, SEO becomes classic consulting which is not very scalable until layered in a bureaucratic hierarchy reminiscent of the Price Waterhouse style of the eighties and nineties. That might not be better than where we are now, and probably supports the case for bringing SEO in-house. Once in-house, though, who will pay for the advanced training and research required to stay current and effective as an SEO?
It seems the key issue for SEO consultants will be bringing performance metrics out front a.s.a.p., to appease the interests of paying clients while satisfying the need for results-oriented pay for SEOs. Those who work on a performance basis probably know what I mean by that, and probably find it exciting (as I do). Unfortunately, it means more secret information outside of the view of the general public. Alas, isn’t that what true SEO has always been?