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Troubled times for SEO firms

Research firm MarketingSherpa recently published a report tracking the revenue growth of SEO firms. According to its findings, revenue grew at a healthy 124 percent rate between 2004 and 2005, but has basically stalled in 2006, with just a 6.7 percent increase over the prior year. In an article citing these figures, MarketingSherpa’s president, Anne Holland, characterizes the findings as mysterious, especially given that marketers who optimize their Web sites can generally expect significant increases in traffic.

What’s ailing the SEO industry? Well, here are a few thoughts:

1. Marketers Are Discovering That SEO Isn’t Rocket Science

SEO practitioners like to view themselves as Jedi Knights who are magically endowed with powers which can magically decrypt the occult secrets of search engines’ algorithms. This glamorous self-image is reinforced each time the mainstream business press reports on their edgy antics.

Frankly, the whole “SEO as Rebel” thing reminds me of my younger days, when teenage hot-rodders would “push the envelope” in death-defying drag races up and down Main Street. These days, of course, the objective of these modern-day rebels is to stay one step ahead of Google, instead of Officer Krupke.

Now I’m not saying that the SEO crowd isn’t bright, doesn’t know the meaning of the occult language it uses or can’t deliver higher traffic to marketers. What I am saying is that most marketers can achieve significant organic rankings without resorting to anything more mysterious than applying the basic optimization principles outlined in Google’s Webmaster Guidelines.

These principles are publicly known, and at root are very simple: first, have great, relevant content that incorporates the core keywords driving your business, design your site in a way that can be easily parsed by search spiders, and have a strategy for gaining high-quality, relevant, inbound links.

Sure, marketers (especially in fiercely competitive verticals) may need to consult an expert to pull ahead in a head-to-head battle with a competitor for highly contested organic rankings. But SEO isn’t rocket science, and just about every marketer who invests a bit of time, research, and elbow grease can realize its benefits without paying a fortune to an SEO firm.

2. Marketers Are Realizing That SEO is a “Fix-it-Once” Task, not an Ongoing Service

Unlike Paid Search, in which it’s a requisite to continually monitor and optimize one’s campaign in order to navigate through a dynamic auction-based environment, SEO is a job that is essentially a one-time task, not a continuing responsibility requiring the services of an outside firm.

Sure, the search engines are constantly tweaking their algorithms, and when this happens, sites rise and fall in the rankings. But the principles upon which the algorithms are based do not change, and it’s unlikely that even complex sites need to be fixed more than once. The problem for SEO firms is that selling a one-time service is generally less lucrative than selling an ongoing one, although this fact is good news for marketers, none of whom need to pay for unnecessary services on an ongoing basis.

3. Marketers Are Wary of Pushing the SEO Envelope

In the last year, we’ve seen several notable cases in which marketers have been severely punished by their association with “edgy” SEO firms whose tactics have resulted in them being blacklisted by search engines.

It’s impossible to quantify the loss in revenue (or, in the case of BMW and Ricoh, the damage to brand) caused by these incidents, but it’s obvious that these incidents have caused many marketers to think about how risky a poorly-implemented or over-aggressive SEO strategy can be.

There are, of course, many ethical SEO firms out there which would never indulge in such risky tactics, but it’s possible that these firms have been hurt by the blowback from these high-profile dust-ups.

SEO remains a crucial task that must be executed before, not after, one begins to conduct paid search campaigns. The value of good organic rankings remains very high, and will likely remain so for the foreseeable future. The SEO industry isn’t about to go away, but the number of firms who “insource” this task may grow, especially as more marketers realize that the knowledge and the tools required to do SEO is widely available.

It remains to be seen whether SEO firms’ slow growth is a one time speed bump or an inflection point marking a period of slower growth and in-sector consolidation. Whatever the outcome, smart marketers will continue to invest in SEO in a way that makes best sense to them, and the best SEO firms will remain in demand, because there remain thousands of commercial Web sites out there in need of basic search engine optimization.

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