Performance Based SEO: Innovative Pricing or Russian Roulette for Backlinks?

When the CEO of a startup web hosting company was searching for SEO help and discovered a company who charges only after his site achieved rankings, he said, “you know the decision was honestly fairly simple.”

Pay-for-rankings, also known as “performance-based SEO,” is an innovative new way to price SEO services that is rapidly gaining customers. But Kris Roadruck, CEO of Click2Rank and noted speaker on black hat SEO, points out that the performance-based model gives firms little incentive not to “burn a domain.”

Indeed some firms’ aggressive link building tactics raise serious questions about the risks customers may be taking by using the wrong firm.

Did You Just Offer Me 1,692% ROI?

Visiting a performance-based SEO’s website can feel a bit like buying rankings in a magical SEO department store. Any keyword you want, just enter your domain name and get a flat monthly price for different rankings tiers on Google and Bing. Can it be any easier?

Unfortunately, it’s not that easy. Let’s do some math: say you get a quote of $650 per month to rank Top 3 for “online payday loans” with a parked domain. That means a Top 3 ranking for that keyword would drive traffic worth at least $11,000 per month (assuming 14,000 monthly exact match searches, two-thirds of clicks on the organic search results, 8 percent of those on the third organic result, and an approximate CPC of $14.14 per click).

Is this firm really offering an investment that generates 1,692 percent return month in, month out?

Why Not Just Rank Your Own Sites?

Checking a more realistic scenario, such ranking a niche handbag site in the Top 3 for “handbags” for $550 per month returns a quote with a stunning ROI of 17x. Asked why the CEO of a performance-based SEO service doesn’t simply use his own services to achieve these rankings for his own sites, he explained that he believed they can scale SEO more effectively as a service provider.

“I’ve never been an entrepreneur that, quite honestly, has built businesses just for money.” But then he also pointed out, “we can’t get ranked for anything. Nobody can. If it’s unrealistic, we’ll decline it.”

I heard the same sentiment from both performance-based SEO firms and customers: regardless of the initially quoted pricing, firms can still turn down your keywords if they don’t think they can rank a site for them. That’s why performance-based SEO is not called “guaranteed SEO.” The only guarantee being made is from the customer – that they will pay if they get results.

Is it Safe?

Different firms use different methods to achieve results. This is where risks can arise.

One performance-based SEO firm told me they need control of customers’ content and even host their websites so they can facilitate on-page optimization and content development. If necessary, they will even rebuild the customer’s site.

Another firm said that they don’t need access to their customers’ sites but provide on-page optimization guidance, and focus primary on off-site factors. He also said their link building techniques include, “certainly nothing like blatant paid links, link farms, or interlinking customers websites together… absolutely zero.”

However when I reviewed the backlinks of one of his customer’s domains (a customer whose name he provided in the interview) in Majestic SEO, one of the first links I found was an exact match anchor text link embedded in a nonsensical, unrelated “blog” post on a domain registered to another company the CEO founded. One can only wonder how links like that might look from Google’s offices, particularly if multiple links pointing to the same customer could be tied to the CEO’s firms.

According to Google’s Webmaster Guidelines, “Some webmasters…build partner pages exclusively for the sake of cross-linking…this is in violation of Google’s Webmaster Guidelines and can negatively impact your site’s ranking in search results.”

A former employee of a performance-based SEO company told me, “really it’s just a link building service… an anchor text numbers game,” and that it’s common for some authoritative links to come from a network of sites the SEO company owns or controls. “They’re using link building methods that were very prevalent several years ago, but are very risky today, such as footer links or links on sites with just irrelevant content, sidebar links, blog comments, or forum profiles.”

Does it Work?

Customers report mixed results with performance-based SEO firms.

In one case, a customer had been using a performance-based SEO for three months, but not seen any results. Most performance-based SEO firms require a minimum contract of at least 3-12 months, which gives their techniques time to produce results. He said, “I’ll pay you all the money you want, just move it up!”

In another case, a customer reported he had reached number one for one of his keywords, which had helped his business grow 300 percent in six months.

A former employee of a performance-based SEO firm estimated that between 50 and 60 percent of customers had success stories, but he had also heard stories of former customers who were penalized or banned by Google.

Will more customers find their sites penalized if Google decides the companies’ techniques violate their spam guidelines?

Tips for Minimizing Performance-Based SEO Risks

Not all performance-based firms use high-risk techniques and some customers may even proceed despite aggressive tactics. The following tips may help minimize the risks for customers who wish to proceed with performance-based SEO, and are generally a good idea anytime you hire someone to build links for your website:

  • Ask the firm not to build paid/rented links, use link farms, or link from websites they own or control. Ask for a guarantee the firm will follow Google’s Webmaster Guidelines.
  • Ask for customer references and hire a second independent SEO to review the reference sites’ backlinks for high risk links.
  • Get a report of your firm’s link building activities monthly and review the links they have built. Your site is still your responsibility, so monitoring your link building activity with a tool such as Majestic SEO or Open Site Explorer is a good idea. Keep an eye on links with desirable exact or partial match anchor text, excessive links from low authority sites (especially those that aren’t cached or with zero PageRank), and links from unrelated pages or sites, especially in poorly written articles. Roadruck advises that the litmus test of safe link building is whether you can explain what’s going on with your backlinks to Matt Cutts.
  • Try to minimize the length of the contract (six months or less is best) or have an “out” if you identify any link building activities that you feel are high risk.
  • Understand when your prices can rise. Some firms have the right to raise your prices after your initial contract period ends. If your website is successful and the SEO firm has the right to increase your fees, you may find your prices go up substantially after your initial period. Worse, if your SEO firm controls your backlinks, you’ll be forced choose between paying the new price the firm demands or risking a drop in your rankings if they pull your backlinks.
  • Understand how your rankings will be tracked, and verify them yourself. When checking your rankings, be sure to add “&pws=0” to the URL of your keyword searches to avoid personalized results from inflating your rankings. Considering verifying rankings using a third-party rank checking tool like AuthorityLabs, seoMoz, or WebPosition.
  • Watch out for old tricks such as conflating PPC and organic rankings, or firms that want to duplicate your site on a new domain that they control.
  • Seek exclusivity on your keywords so that your competitors cannot usurp you simply by outbidding you with your SEO firm.
  • The devil is in the details of performance-based SEO contracts, so it’s a good idea to have an attorney review the terms of service and other agreements before you sign up.

Bottom Line

As an SEO consultant who charges by the hour, I’m sympathetic to the idea of performance-based compensation. I like the idea of aligning the client’s payment for service with the period they reap the reward from my efforts (especially if that continues for months after my actual work has finished). I have also never liked pricing work separate from the value it creates.

Performance-based SEO solves both these issues: customers pay after their rankings bear fruit and prices vary based on competition and the value delivered.

However, the model currently has a disconcerting mix of over-the-top claims, moral hazards, and tactics that can do damage to the websites of unwary clients. Customers should research firms, do their diligence, and get comfortable that the techniques used by the performance-based firm are in alignment with their personal risk profile.

For many site owners, no 1,692 percent ROI keywords are worth risking the value of the site.

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