Comparing SEO Business Models

Feb 16th

One of the great things about SEO is that it allows you to see many lenses on business that you can't normally see with most other professions (outside of perhaps something in high finance or management consulting anyhow). One day you are building a bootstrapped business from scratch wondering when it will make its first Dollar, and the next day your on the phone with McKinsey consultants or an executive from a fortune 500 company talking strategy.

Zeta Interactive's Hugo Guzman is one of the the folks in the SEO industry who has a broad experience set which perhaps eclipses my own, as he has done virtually everything. And so I recently interviewed him...

You run some of your own sites, have done some private SEO consulting, I believe you may have done some in house SEO for a while, and are now deep into the bowels of the SEO agency world. What are the best and worst parts of each role?

Great question! Here’s my take based on personal experience in each role.

Running your own site(s)

Best Thing: That feeling of unbridled entrepreneurism. I’ve always felt that website building is sort of like the new real estate development, only anybody can do it and it costs less than $100 to get started (if you know what you’re doing). The other great thing about running your own site(s) is the ability to cut out on time wasting and bureaucracy. There’s no need for filling out corporate approval paperwork or sitting through useless meetings or conference calls, so you can focus in on building content, building links, building databases, and building relationships.

Worst Thing: The cold hard reality of monetization. There used to be a day when paid links could easily bankroll early development until you got other revenue streams to a point of sustainability, but that well has dried up to a certain extent. Affiliate revenue and Adsense are both viable but take time to develop, especially if SEO is the main source of traffic, so like you, I believe that the best option is to cut out the middle man and develop a product/service of your own that fills a specific niche need at a fair price. I think that the emergence of FourSquare and Twitter localization suggests a strong opportunity for hyper-niche, location-based website development. You don’t have to be the best in the world at a specific thing in order to be successful. Just be the best in your locale or region.

SEO consulting

Best Thing: Being able to do SEO “The Right Way” (or at least “your own way”). It feels good to execute an SEO program that way you see fit, especially when it works! It makes for a very rewarding experience. It’s fun to build out the list of deliverables, the timeline for implementation, and the success metrics and KPIs that will be the foundation of your client programs.

Worst Thing: Dealing with the sales grind, chasing after clients that don’t pay on time (or at all) not getting the hourly bill rate you know you deserve, etc…basically all the business stuff that has little or nothing to do with pure SEO. Unfortunately, many of the SEOs that go this route get caught up in the grind by failing or refusing to fire bad clients, so that they can focus on building revenue by offering more granular or expanded services for their good clients.

In-house SEO

Best Thing: Being embedded in so many different aspects of a business and learning about marketing and biz dev elements outside the pure SEO realm. I spent several years working with CBS Interactive and I learned a ton about so many things and worked with some really intelligent people.

For example, I learned how C-level executives frame marketing channels like SEO. The main success metric that I was measured on was percentage of overall referring traffic (well under 10% when I first started). Even though I was able to exponentially grow natural search referrals, especially for key niches like fantasy football and March Madness – both of which are huge moneymakers for CBS – the cumulative effect on overall traffic was minimal (never reached 20%). The reason was simple; CBS owns their major television network as well as a myriad of local television affiliates, radio stations, billboards, email addresses, etc, which literally drove millions and millions of unique referrals.

This introduction to mass media metrics helped me gain perspective on the role SEO plays within the larger scheme of things (brand building and management, push/interruption marketing, email marketing, etc). And it was this perspective that would help me connect with marketing executives when I made the move to agency SEO, because I finally understood that while SEO is arguably the most cost-effective marketing channel, it was only one piece of a much larger puzzle.

Worst Thing: It’s hard to move up the corporate ladder and earn big dollars. Because SEO is typically straddled between marketing and IT, it’s tough to move up into upper-management positions. Some companies (like the Tribune Company) are starting to wake up, but for the most part, it’s still tough to move on up.

SEO Agency

Best Thing: It’s sort of like the Peace Corps in that it’s the hardest job you’ll ever love. Granted, you’re not really helping the world be a better place (just helping companies become more profitable) but getting to work with so many different verticals, marketing philosophies, business executives, and web environments is incredibly rewarding. Agency SEO (if you work at a good agency) will undoubtedly make you a better SEO, and a better business person in general.

Interestingly enough, it’s the seemingly unconquerable workload that proves to be the catalyst for professional growth. Dealing with multiple clients, each of which has impossible deadlines and unrealistic ROI expectations, forces you to prioritize your efforts and focus on the strategies and tactics that will deliver the most bang for their marketing buck. SEO’s that fail to grasp this are quickly burned out and leave the agency life (and usually return after a year or two after realizing that they can’t make much money in-house). SEO’s that “get it” quickly make an impact for clients – and the agency’s bottom line – catapulting them into management and executive roles.

Worst Thing: It’s sort of like the Post Office. The work just keeps coming and coming. It’s extremely stressful, demanding, and demoralizing at times. But hey, what doesn’t kill you makes you stronger right?

From which of the 4 roles do you see the greatest profit potential?

That’s a tough one. In-house probably has the least profit potential, followed by agency work. Although it’s worth pointing out that some of the better agencies out there take extraordinary steps to keep talented individuals happy and give them a true stake in the company’s success. My agency definitely falls in that category.

Consulting has very solid profit potential but building your own site(s) is definitely king in my book because if you pick the right niche and truly devote yourself on all levels the potential is limitless.

You (Aaron Wall) write about this topic quite a bit, but it’s important to re-emphasize. If an enterprising SEO is looking to start their own site(s) the first thing to take into consideration is the level of passion they have for the topic/theme that the site(s) will encompass, because if the passion isn’t there, it’s unlikely that said SEO will have the motivation to work through the inevitable plateaus that await his/her new business. Also, as most of us know, building the right kind of content is what often leads to the inbound links that will serve as the foundation of a solid search presence, and that’s much easier to do when you truly love the topic/theme you’re dealing with.

When you guys take on new clients are you knee deep in the SEO projects? Or do you focus more on training your team?

Truthfully, I’m no longer involved in day-to-day management of SEO projects. I do touch almost every single account, but usually it’s as an advisor to the SEO specialist that’s assigned to the account or because the client needs to tap into my historical knowledge of the account (I’ve been working with some of our clients for several years now and know more about their history than some of their employees). Basically, I keep tabs on each account and come in to deal with really tough and/or complex scenarios that junior team members have never encountered. That said, I do spend a considerable amount of time testing specific hypotheses, either on client sites or on test sites that are owned and managed by my agency.

One of the most memorable tests we performed was for a major insurance and financial services brand (one of the biggest in the world) that was having a ton of trouble getting their agent profile pages indexed (they had thousands of them). They were convinced that simply adding these pages to their XML sitemap would do the trick, despite the fact that Google explicitly states that submitting an XML sitemap does not replace override their normal indexing and ranking methodology. In order to convince them to take an alternate route (focusing on internal linkage that helped eliminate orphaned agent pages) we simply tested their hypothesis by taking a baseline measurement on the number of indexed agent pages, then adding all of the agent pages to their XML sitemap en masse and then measuring the impact on indexing for those pages (the impact was nil). We then convinced them to implement our recommendations and subsequently measured their impact on indexing of agent pages (over 80% of those pages were subsequently indexed). The result? An interesting conclusion that helps guide our recommendations for other clients as well as an incredibly happy Insurance brand that has now been with us for going on three years!

As for the rest of my time, it is spent training our team of specialists (and the sales folks and the account management folks) supporting sales across the US, leading sales efforts in the Southeastern United States, and working with our product development team to build tools that help facilitate SEO. Oh and I try to help promote the agency when I find some spare time ; )

It wasn’t always like that by the way. I started my agency life as a specialist and have gradually moved up the ladder.

Many of the bigger agency-styled companies sell watered down services of limited value. For example keyword ranking / websourced / marketsmart interactive went from the largest SEO company to closed almost overnight. How do you scale SEO within an agency while preventing the watering down effect that is common at most?

This is an extremely tough problem to overcome, but one of the things that we’ve focused on is product development that helps automate certain facets of the SEO process, so that our specialists can spend their time being truly strategic.

For example, back in 2008, I figured out that our specialists (including myself) were spending an inordinate amount of time formatting and filling out the Excel templates that are used to deliver page-level code recommendations to clients (more or less a staple of agency life). This included copying and pasting the existing code side-by-side with our recommended code, so that the client’s IT/dev folks could use it as a point of reference when implementing. This was essentially data entry work that was extremely tedious and took up a tremendous amount of time.

Working with our tremendous product development and digital services team based in Hyderabad, India, we were able to develop a web application that automatically scraped the designated code for a particular client web page and populated in the correct fields within our Excel template. Now, all our specialists have to do is fill in the recommendations in the appropriate fields, cutting delivery time in half. It’s tremendous productivity booster and also a tremendous morale booster for our specialists.

If you’re on the client side and are interviewing perspective SEO providers, make sure that they have some sort of technology platform in place that will help automate or at least facilitate some of the non-strategic facets. Otherwise, you’re going to spend a ton of money on what essentially amounts to data entry.

From a consumer perspective, a lot of the agencies are long on sales but short on results. What are some of the key signals consumers should pick up on when determining if an agency is the real deal or one that is selling watered down water?

That’s easy.

Ask them if they can help with direct implementation via CMS and/or hard coding. Ask them to go into excruciating detail in terms of how they handle link building (most agencies claim they do link-building, but it usually just boils down to directory submissions and paid links). Ask them to explain how content influences link-building and social media efforts. Ask them to go into excruciating detail in terms of how social media and SEO dovetail. Ask them to go into excruciating detail in terms of how they leverage analytics as it pertains to SEO. Ask them if they’re accustomed to working with senior (even C-level) executives to facilitate approval and implementation of recommendations.

If they’re worth their weight, they’ll jump at the chance to give deep answers to each and every one of these questions.

As an ad agency you guys are also involved in other marketing elements from companies. Does search ever become a key consideration when it comes to product naming, product positioning, and other advertising formats? If yes, could you share some examples?

My agency was arguably the first to truly embrace the cross-channel interactive agency model, so we definitely work with clients across a variety of marketing channels, and as a matter of fact, we offer a variety of services beyond search (we just made the Forrester Wave for email service providers).

I can’t get into specific clients and URLs due to confidentiality agreements, but I would say that well over 50% of the clients we work with take search into consideration when naming products, positioning products, and even picking vanity domains. I would say that about 25% of our clients make search their top priority when considering these types of things. Those are our favorites, because they really “get it” and work SEO into everything they do.

One example that I can give you (without revealing specific client names) is the purchasing of vanity domains to drive SEO for specific product/service offerings. I’ve seen companies drop anywhere from a few thousand to hundreds of thousands in order to secure domains that have large, authoritative link profiles and already rank for high volume keywords. In fact, I recently did some consulting on behalf of one of the largest VC firms in the world, helping one of their clients (we’ll call them “Company A”) essentially put a price tag on a the value of a domain that was owned by a smaller firm that “Company A” was looking to acquire. I actually think that this type of work could become a nice hyper niche for me in the future (until Google and others finally accomplish their goal of eliminating domains from the search equation…but that’s a story for another day).

What strategies do you use to help clients provide adequate resources for a large or complex SEO assignment when the results might take many months to materialize?

We’ve gone as far as to help clients screen potential hires or contractors in order to help them staff up for large initiatives. In addition, we’ve embedded our employees at a client’s office for large stretches of time in what you could call a “dedicated resource” type of arrangement. Lastly, we’ve helped coordinate cross-division committees and/or multi-agency collaboration in order to help get large initiatives off the ground.

Basically, I’ve always preached to the team that they have to do anything and everything to make things happen. Often times, it’s this extra effort that ends up become the primary measure of success in the client’s eyes, especially if there are some solid metrics to go along with it.

What success metrics are used along the way to help clients appreciate the returns on the SEO efforts?

I find that year-over-year trending is extremely valuable because it takes seasonality into account, and we’ll deliver that type of trending both at the aggregate level and focused on specific “big money” keywords. Incidentally, our agency doesn’t shy away from extremely competitive keywords. We go after everything that fits the client’s vertical but just make sure to set expectations early on. Clients deserve to rank for the biggest money terms, but they also need to understand that in certain cases it could take years to achieve above-the-fold placement.

Also, I believe that it’s critical to drill down and measure non-branded keywords as opposed to just looking at raw aggregate referral data, especially when you’re working with big brands that drive mammoth amounts of brand queries. If you don’t strip out the branded search referrals, then you’re not really measuring SEO (99% of the time, branded keywords have and always will rank No. 1 so the traffic they drive are a function of brand awareness, not search engine optimization).

Google is known for letting bigger brands get away with being a bit spammy. Do you ever suggest to clients that they have the opportunity to push the window?

The short answer is “Yes”.

We conform to “White Hat” SEO (whatever that means) but we also believe that it’s our job to educate clients on techniques that may or may be deemed as “spammy” by search engines like Google. They deserve to understand the entire SEO landscape, not just the vision created by Google’s Webmaster Guidelines.

Also, for clients that are already relatively SEO savvy and were already dabbling in techniques deemed unsavory by Google, we will gladly provide a third-party opinion and consulting on those activities. We believe that they deserve that level of service for the premium they’re paying.

Within a company internal politics often end up kicking SEO into the back seat. When doing agency work, who are the key individuals from within the companies you service that you consider it a must to loop in on the project?

Start with the CEO (seriously). And by the way, this also applies to social media initiatives.

The goal is to find a way to move the needle for a client, even if we are faced with a tough situation in terms of marketing approval, legal approval, or IT implementation (this is more or less par for the course in verticals like Pharma and Financial Services). If we can move that needle, then we’ll immediately push to get in front of upper-level executives, so that we can help them understand what we’re trying to accomplish in the long term (and that we won’t accomplish it at the expense of their brand affinity or legal standing).

If you’re not getting face time with a senior director, VP, or C-level executive, then you’re probably not doing a very good job.

Hugo Guzman is the Vice President of SEO & Social Media at Zeta Interactive. He can be reached via email at hguzman@zetainteractive.com or via Twitter at http://www.twitter.com/hugoguzman.

Published: February 16, 2010

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Comments

February 16, 2010 - 10:44pm

Thanks for the opportunity, Aaron.

I think that the most important thing a young, enterprising SEO should keep in mind is that there are several different paths to long-term success. The key is to pick the path that fits your personality and lifestyle.

Or you can do things the hard way like me and try them all out
; )

February 17, 2010 - 5:21pm

Great stuff. I'd have liked to hear more about Hugo's experiences with SEO consulting and in-house work, but I see that his insights into the agency world are valuable.

Question for Hugo: as you add automation to your agency processes (keyword research, site recommendations, etc) it's safe to assume your costs are dropping. So two parts to this question:

1) Do you see this is directly increasing profitability - or are you "passing the savings on" to your clients and focusing instead on increasing volume (more clients, projects, etc)? I expect the answer here is somewhat sensitive so feel free to dodge.

2) Do you foresee your agency needing less staff moving forward as automation kicks in? Kind of a countermeasure to that "morale boost" you mentioned?

February 17, 2010 - 6:10pm

Hey Mike! Thanks for the feedback. Hit me up anytime you want to chat about the consulting and in-house side of things.

As for your questions:
1) It definitely helps increase profitability (agencies are designed to increase profits after all) but it also allows us to get ultra competitive in terms of pricing, which in the end, means that some savings are passed along to the client.

2) Yes, that's likely the case. With automation becoming more of a factor in the SEO process, you get into a situation where it takes less humans per client to properly optimize. The key, as with most things in life, is to find the happy medium.

February 18, 2010 - 4:16am

Wanted to say thanks Hugo, I really enjoyed this read.

February 18, 2010 - 6:01am

Aaron, This was a great interview. Thanks for bringing it into the wild.

Hugo, as someone going down the road of helping to develop an agency seo function I'd appreciate learning more about your insights. Do you blog anywhere on this topic at all?

Thanks for your insight.

Regards

Edmund Pelgen

February 18, 2010 - 3:05pm

You're welcome Martypants! Glad you enjoyed it.

Thanks for the kind words, Pelgen! I don't blog as much as I would like, but you can read some of my SEO/agency related stuff at http://blog.zetainteractive.com or http://www.hugoguzman.com.

Or just track me down on Twitter and I'll shoot you my email address.

February 19, 2010 - 12:08am

Ver very very nice interview that really shows the different side of our work and the challenge we have.
Nice

February 19, 2010 - 12:22am

Glad you enjoyed it, jberard!

February 19, 2010 - 9:16pm

Hello Aaron and Hugo,
Great interview. However, Hugo, I disagree with your suggestion about going into "excruciating detail" about various aspects of SEO implementation when queried by a potential client. As a seasoned marketer and C-level consultant, I would argue the opposite. A consultant with even moderate SEO understanding is likely more experienced and knowledgeable than someone looking to engage such services. Offering up "excruciating detail" to such queries is simply giving away valuable service for free (and one that Aaron has written about regarding his related struggles). I would argue that a better approach is to ask the potential client enough questions to gain enough insight to translate said client needs into a conceptual proposal offering the solution to increasing such a business's profits. Of course, one would need to answer any potential client's questions to their satisfaction, but I would suggest specifically "not" going into "excruciating detail." Other than that, it bears repeating, great interview!

February 20, 2010 - 9:43am

From my perspective (for smaller SEO companies and individual consultants) I am with you 100% Skyworks. If you are the brand and you do the work then you can't be giving away free labor to tire kickers.

But I think the agency model is different. Generally with most agencies the services are typically not as customized, with lower end wage slaves doing the work (even if the client pays hundreds per hour for the labor they are not getting you or I or Hugo doing the work), and agencies typically bloat out the price a bit too (to make up for the sales cycles and because brands sometimes expect to pay more to get the best, and that paying more means getting more). To make all that work, I think agencies need to be *really* good at addressing client concerns before and during the contract.

And that also speaks to the problem with quality of work though...if the best and brightest are usually working sales or speaking at conferences then they are not getting as much direct feedback from client projects. But a big piece of that is (at least currently) taken care of through the types of clients they attract. If the agencies attract the largest brands and Google's CEO says "brands are how you sort out the cesspool" then the gravity of those brands can carry the SEO quite a bit to where they don't have to ride the dark gray line or use new techniques to build rank and yield. Simply making sure that they have the fats trimmed away and are already leveraging what they already have to its full potential often is enough to increase non-brand search traffic by a factor of 3 to 5.

For us, one of the hardest parts of some of the bigger clients we worked with is working with (fighting off?) their internal lawyers to manage our risk while giving them advice (some lawyers want to give you 10 or 11 figures of downside risk even if the company is only paying you 5 or 6 figure for the work). But once we commence work we tend to hit home runs. There are always big structural issues and missed opportunities that are easy to fix and big wins.

Like in-house SEO, I think the skills for corporate agency SEO are different than the skills needed for affiliate driven SEOs. They are not easier positions, just ones with a different flavor of stress & labor. A lot of it comes down to leadership and sales and creating scalable processes versus scrapping it out trying to fight to earn a couple more links.

February 20, 2010 - 6:30pm

Great exchange Skyworks and Aaron.

I actually tend to agree with you, Skyworks. The problem is that in what has become an ultra-competitive space littered with well-known brands (that may or may not actually be any good at enterprise SEO) sometimes you have to offer up a free sample of goods in order to land the deal (especially if your agency is the new up and comer with less of a brand track record). That said, even when we do go into excruciating detail, it's usually just a snapshot that demonstrates our expertise while not giving away the farm (or sucking up too many hours of work).

Aaron, you hit the nail on the head in terms of legal issues and legal stakeholders in general. For verticals like pharma and financial services, it can make SEO virtually impossible.

Maybe down the road when I find a little space of time, I'll write up a post about the crazy constraints that legal has presented to our team over the years. It's truly hilarious stuff!

February 20, 2010 - 10:58pm

Interesting read, thanks for sharing :-).

I remember Aaron(/you) say that the future of the SEO consulting market didn't look too great, (I think) because of companies bringing SEO/Online Marketing in-house.

However, will the demand from small- to mid-sized businesses who simply can't afford (or dont want to worry about) bringing SEO in-house...not remain huge for a long while...with literally everybody needing a (good) website these days?

Is this mostly true for the bigger clients you're working with Aaron (as mentioned in your comment above)?

Obviously, am just as interested in Hugo's opinion (or anyone else's) :-).

February 21, 2010 - 7:04pm

The hard part with providing services *profitably* to small businesses is that most of them lack both time and budget. If a person lacks one it is easier to come to an arrangement. But if they lack both it is much harder. I think for most people a better way of delivering local or vertical services would be to become a publisher who has some control over the traffic flow and sell ads.

Yes SEO consulting for small business will still be around as an option for a long time...it is just a low profit model. For as much brand equity as I have built up, how long I have worked on this site, and how hard I work on this site even this site is not very exciting from a revenues perspective.

February 22, 2010 - 2:36am

Good question, Patrick. I think that SEO consulting offers the most profit potential at the Fortune 5000 level.

The reason is simple. These companies allot a specific budget for marketing services like SEO, so it's not really a question of convincing them of the value of SEO. It's just a matter of convincing them that you're the best option.

It's highly competitive, but the money is definitely there (at least at this point in the evolution of marketing).

February 22, 2010 - 5:26am

Interesting. Thanks for the replies..something to think about :-)

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