It is easy to appreciate how under-priced some SEO services are when you look at what people are willing to pay for other traffic sources. $11 million in domains changed hands at the recent TRAFFIC conference, and $52 million more would have if the owners will willing to let them go! Once domains get properly developed their value quickly increases. Business.com was claimed to be overpriced in 1999 for 7.5 million, but now is up at auction for $300 million plus. Business.com is not much more than a thin arbitrage play, with a great name, great branding, and great marketing, all funded by the power of search.
To appreciate how much marketing and sales they do, consider that they only employ 6 editors to run the entire directory, while having around 100 employees. Without SEO/SEM that domain would not have the leverage needed to get syndication distribution partnerships, have strong revenues, custom ad deals with Google, or command such a high multiple.
I have spent $10,000+ buying a non-type-in domain name that someone paid $8 for. I have done it more than once in the last month. Why? Synergistic value in branding, associated perceived trust, and market differentiation...which are all important in a crowded marketplace.
Are domains overpriced? If you pay retail and don't have a plan for them, maybe. If you have a good plan and develop them (or buy below retail in a growing market) you should do well. As ad dollars continue to move online almost all markets are growing markets.
Sure a lot of people think you are at the mercy of Google as an SEO, but in certain markets people EXPECT to find certain sites. Google has to rely on showing some partners in their organic results to sell paid search ads against. If you look at Google's personalized homepage tabs they also offer a I'm Feeling Lucky button that adds the most popular items to that tab. If you create a tab for your keywords does Google push your feed? If you get the right name and market the hell out of it, I think your rankings, traffic, and business model are at least as defensible as type in traffic or just about any other business model.
As SEOs we tend to undervalue some of our assets because the work we do for clients is so valuable relative to the rates we charge. After a few hours of work you can offer most clients strategies that increase their non brand traffic by at least 10 to 20%. But when you hear that Business.com might get $350 million for something making $15 million a year, it makes it easy to want to heavily reinvest into creating a real brand of your own, instead of working on a group of smaller projects.
If you get a scalable business site up to $30,000 a month in free cash flow, then reinvest all of that into marketing and branding for a couple years, it is possible to build something that generates at least a few million a year and sells for at least 8 figures. At that point you can retire if you want to, but I will be 30 in a few years, so I need to start pushing harder. :)
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