Smart Investors Systematically Undervalue SEO

Written on
Sep 1, 2011 
Byrne Hobart  |

DIGITAL DUE DILIGENCE – VCs don’t like SEO-dependent companies, because SEO isn’t the competitive advantage it used to be. Wall Street doesn’t like SEO because it’s too much of a black box.

They’re both wrong: public perception of SEO is, by nature, a few years behind the industry most of the time. Why?

1. People are usually aware of SEO when it’s done badly: most people think of news as “news” and not a smart SEO play; most people think of keyword-stuffed articles as SEO, not as an obsolete SEO strategy.

2. The people who try to rank for SEO-related terms are usually selling high-margin, low price-point products, which tend to be scalable and commoditized.

So it’s understandable that the average person who thinks about SEO thinks of it as a set of strategies for making a site search engines will like, at the expense of making a site humans would like instead. But that’s not an accurate description. Due to some forces that are intrinsic to the practice of SEO, and some that have emerged from the way the industry is structured, SEO isn’t just about gaming: it’s word of mouth marketing, rethought as a science.

At SEO conferences (like this one, where DDD will be part of a panel), there are still a few talks about the back-end technical issues. But that’s not what gets people excited. Hot topics now are:

  • How to write content that convinces people to share it.
  • How social sharing signals impact search.
  • How search engines are adapting to different kinds of queries—the default schema for product search is completely different from the default for people search, discussion search, or local search.

Other kinds of marketing consider these factors, but SEO focuses on them more than pretty much anyone else. People practicing explicit “word of mouth” marketing or social media marketing are aware of these factors, but they don’t have the numbers to back them up.

This wasn’t part of some long-term plan; SEO used to be almost entirely a matter of gaming search engines, not catering to users. A few forces have caused this change:

1. Search plus social monetizes better than social alone: so far, Bing and Google have done very well with socially-enhanced ads—per pageview, they’ve probably benefited far more than any of the social media sites whose data they use. Meanwhile, social media sites haven’t managed to turn search into a major income stream.

2. Search is an oligopoly at the high end and anarchy at the low end. There are a couple big search companies with basically limitless appetite for experimentation. And then there are the independent search engines, the vertical-specific search engines, etc.

The larger search engines innovate glacially but precisely—every change they make has been bucket-tested against every possible alternative. The smaller search engines change more experimentally.

Basically, it’s an environment where every search engine is evolving towards better reflecting user psychology. The optimal SEO strategy is to optimize for the search engine of the future.

3. SEO as a career only makes sense if it’s not commoditized. Very few people can make a living as SEO copywriters; the market wage is enough to pay costs of living overseas, but not in the U.S. So American SEOs are gradually transitioning into SEO-sensitive web development or SEO-sensitive general online marketing. Since search engines are relentlessly expanding their use of nontraditional signals, every online marketing field is gradually bleeding into search.

This is visible if you’re in the SEO industry, but it’s invisible to almost everyone else. Facebook marketers didn’t see the Facebook/Bing deal as paradigm-shattering; SEOs didn’t, either, because they saw that general trend coming.

In lots of fields, an article that starts with “People are wrong about X…” has to end with “…and here’s what to do about it!” But in a comparatively efficient market, that’s pretty much pointless: what you do about other people’s mistakes is that you profit from not making them.

Cross-published at the Digital Due Diligence blog. Sign up for the Digital Due Diligence newsletter here.

Byrne Hobart is cofounder of Digital Due Diligence, as well as director of editorial SEO for Yahoo!. The views expressed in his bylines are his own and do not necessarily represent Yahoo!'s opinions. Previously Hobart served as director of marketing strategy at Blue Fountain Media, where he focused on search engine optimization and pay-per-click strategies. He has been cited by The New York Times, The National Review, The New York Observer, Radio Free Europe, Voice of Russia, and TechCrunch, and has been published in Business Insider. He spoke at Search Marketing Expo West in March of 2011 on “The Economics of Content Farms.”

Reader Comments.

Did Gavin Dunaway write this or did Byrne Hobart?

Posted by Adam DeMartino | 4:49 pm on September 1, 2011.

Byrne wrote this — my sloppiness in editing is at fault for the mix-up. I could only dream of being as insightful as Byrne.

Posted by Gavin Dunaway | 7:38 pm on September 2, 2011.

great post, I am wondering what your thoughts are on the impact of Google+ on SEO and what you think Google has in store for the use of social signals and SEO rankings

Posted by St Louis SEO | 10:51 pm on September 6, 2011.

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