This question came up in a discussion today. Imagine that Blue Horseshoe hires your SEO company to optimize their web site. Blue Horseshoe sign a twelve month contract and you do your thing. You fix the indexing problems, add new content and implement a link building campaign. As a result of your efforts, Blue Horseshoe online sales skyrocket from $10,000 a month to $150,000 a month.
Renewal time comes around and Blue Horseshoe decides that they don’t want to pay for SEO services any more. They do not renew your contract. However, Blue Horseshoe continues to enjoy good rankings, traffic and conversions as a result of your work. In fact, over the next twelve months they sell an average of $100,000 a month.
Since you are no longer under contract to Blue Horseshoe you do not gain anything from the continued success of your SEO efforts. Should SEO’s fees include royalty payments to cover a reasonable period of time, say 12-18 months from the date of termination, in light of the value brought to the customer?
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Bruno Amaral 10.15.06 at 8:59 pm
Not all of those sales will be due to the new seo-campaign, so my stand is “No”.
Yet, it would be smart to begin a “previous campaigns” portfolio. Stating that bluehorseshoe invested X and had a huge increase in sales would be valuable.
Ian 10.16.06 at 12:05 pm
One way of handling this would be to have the client pay a percentage of increased sales, but naturally that presupposes that the client already has a strong analytics package in place long before any SEO work gets done. It’s easy to see why the best in this industry charge $500/hr.
Pricing of SEO services is a classic conundrum, it’s good to see a post about this. I know Jim Boykin has discussed this a few times at his blog…
David Wilson 10.16.06 at 1:59 pm
As you said Ian, pricing of SEO services is a classic conundrum. Most SEO companies go the “safe” route and charge by hour or project. I wonder at times whether a revenue sharing/royalties type agreement would be better.
David
Sherwood 10.17.06 at 11:55 am
It’s a case of “live by the sword, die by the sword.” I could imagine that a client, if approached by an SEO requesting royalties, would also request the inverse: a small token fee, so that most of your revenue would be the royalty. This isn’t something that would appeal to me, because many clients that don’t follow through on SEO projects.
As outside consultants, we have no control over the quality and timing of implementation. Royalties are a plus when dealing with proactive clients, but introduce more risk when deal with a (far more typical) lax client.
That said, if we were talking about a microsite, or some other self-contained project that fed the client’s site with leads/sales, then I think royalties have potential. But that’s basically a reinvention of affiliate marketing, isn’t it?
David Wilson 10.17.06 at 3:27 pm
I don’t view it as a version of affiliate marketing Sherwood. I see it more as a pay for performance compensation plan?
Michael Brito 10.17.06 at 8:43 pm
Great discussion. One question that should be raised is “what if sales decreased”? If the client has a good analytics package, it’s easy to track revenue back to natural search. However, this also opens the door to many more variables like “which click should get credit for the conversion?”, especially if the client is also using paid search.
Michael
David Wilson 10.17.06 at 8:56 pm
I agree Michael that a good analytics package is key to measuring any type of SEO campaign. You also raise an interesting question about what click counts. If someone is conducting an informational search they might used a paid listing to visit your site, and the come back and make the purchase based upon an organic click. Does the paid or organic get credit for the sale?
Michael Brito 10.19.06 at 11:43 am
I wonder if there any comScore studies out there that look at this metric. One idea is to assign a weight to paid search and natural search (i.e. 60% to paid and 50% to natural); and apply those percentages to your conversion goals. Thoughts?
David Wilson 10.20.06 at 1:42 pm
Hopefully the analytics package that you are using Michael will allow you to tell the difference between paid and natural traffic. That might be an easier path to take instead of using Comscore data.
Michael Brito 11.01.06 at 2:17 am
Oh, of course. But most (if not all) analytics packages only attribute conversion data to the last click. I was suggesting that perhaps there might be comscore study that can determine the percentage of consumers who click on paid/organic; and more importantly what they clicked on during the entire purhase cycle so that we can assign a weighted values to all conversion data, whether from paid or ogranic blah blah blah…
Maybe I am confusing myself here…
: )
David Wilson 11.01.06 at 9:32 am
No you make a good point Michael in that users might click on organic and paid listings differently depending on where they are in the buying cycle. I have not seen any recent data on this but if anyone does let me know.
Rosie 04.26.07 at 2:51 pm
I thank you for your comment.