• By: Mike LaLonde
  • August 13, 2013

Performance-Based SEO: Disadvantages of Pay for Performance SEO and Why We Don’t Do It

We have people ask us about performance-based SEO on a fairly regular basis.  On the surface, it seems to make sense.  An SEO professional does work, it’s successful, the client makes money, and the SEO gets paid.

But unfortunately, it isn’t quite that simple.

With the perfect agreement, the advantage here is that an SEO earns based on true performance.  It should compensate for the risk the SEO is taking, account for the long-term benefits of rankings, and build incentives for doing a good job.

The problem is, the perfect agreement/contact is seemingly impossible to develop.

Here are 6 Reasons Performance-Based SEO Doesn’t Work:


It doesn’t value an SEO’s skills

Like any B2B relationship, a certain amount of mutual respect and trust is important.  Most performance-based contracts are pretty basic, loose relationships with very little emotional investment between the two parties.

Hiring someone on a contract like this is telling them that you really don’t believe in them.  If it works out, great.  If not, no loss.  If both parties aren’t taking some kind of risk, then you’re preparing to fail.

How can you establish that mutual vested interest if you want to be completely performance-based?  Exclusive contracts, guaranteed contract length, company resources to support the effort, etc.


It creates a “get rich quick” incentive for SEO’s

When hedge fund managers and asset managers get behind on their performance, they’ll sometimes take unnecessary risks to get back above the market (the ones that jump off bridges, that is).  When bad gamblers are down, they double their bets and end up in rehab.  If you hire an SEO with the incentive to produce fast results with great returns without a guaranteed income to lose or a life savings to forfeit, what’s stopping them from using low-quality tactics that will end up hurting your business in the long-run?

Not much.  Especially if you’re not careful with the contract.  If you’re going to go performance-based, make sure you take into account long-term performance and reward your SEO appropriately.


It isn’t the SEO’s job to control the conversion funnel

Ultimately, you’re paying your SEO to make you more money.  It’s a good chance that’s how your contract will be built.  But a lot of that is out of the hands of the SEO professional.

They might not be able to control conversion enhancements on your website.  They can’t improve your sales process.  They can’t change the way you make business decisions or the clients you take can.  All they can do is try to increase your relevant traffic.

Unless, of course, you create that relationship.  There needs to be an open dialog between the SEO contractor and the client.  Roles need to be defined, influence needs to be established, and an open line of communication is necessary to keep everyone happy.


Incentives are difficult to develop

Is there any way to develop the perfect contract? Here are some problems:

Traffic doesn’t work

Quantity doesn’t mean quality. Just because an SEO is driving a lot of traffic means they’re doing the best job they can.  You’d much rather have 10 visitors converting at 30% than 100 visitors converting at 1%.  So it’s tough to pay based on traffic.

Rankings don’t work

Paying for certain rankings never really is a successful approach.  An SEO strategy shouldn’t be about ranking one or two keywords – that can be part of it, but an overall strategy is about driving long-tail traffic as well.  You’re really incentivizing based on a system that is inherently flawed.

Plus, SEO is both long-term and short-term when it comes to ranking keywords.  You don’t want an SEO consultant focusing on getting top 5 keyword rankings on some keywords while ignoring lower ranking ones.  They should be trying to increase those too.

Sales/Conversions don’t encapsulate full value

Now this one is a little bit better.  But again, it doesn’t account for the long-term potential the SEO is building.  If you want this to work, you need to develop a long-term contract or an auto-renew based on certain performances.  This goes back to the mutual risk discussion.

Plus, if you treat your customers well, they’ll come back for additional purchases, or refer friends.  Your SEO isn’t going to get paid for those.  If you do engage in a Sales/Conversion agreement, make sure long-term potential is built in and the SEO can be compensated, or at least is aware of, long-term sales and referrals.


Creates a “me vs. you” team atmosphere between SEO and business owner

For whatever reason, a lot of clients want to put the onus completely on the SEO professional to increase rankings rather than seeing it as a partnership.  Joint ventures are partnerships.  Loose performance-based relationships are not.  The sales company doesn’t really mind all that much when their door-to-door knife salesman quits.  You need to make the SEO feel valued.  And if you’re not going to do that with a guaranteed payment, you’ve got to find another way.

Business owners need to constantly be asking what they can do to improve rankings.  The SEO will benefit from other advertising programs the client executes as well.  They should want to do that, not feel like they are giving an SEO help they shouldn’t be receiving for free.  It’s a strange mentality, but that’s often how it works.

Don’t create that “me vs. you” mentality.  Understand SEO is a partnership, and be willing to listen to your SEO contractor to help maximize the SEO effects of all of your marketing efforts.


Contracts often lock parties into unfavorable relationships

What if the contract you develop is unfavorable one way or another?  If it’s unfavorable to a good SEO, they’ll feel cheated and quit, and you’ll have lost a quality service provider.  If it’s unfavorable to the company, the SEO contractor has to decide between essentially extorting the company for money or renegotiating the contract.

As you can tell, based on the complexity of SEO relationships, it’s not uncommon for the contact seeming unfair to one of the parties.


The Takeaways

Figuring out performance-based SEO contracts is very difficult.  It isn’t our general practice to engage in them.  It’s not impossible to figure out, but in general clients who want them don’t have a thorough understand of the long-term benefits of SEO and are looking for something for less than it’s worth.

Our strategy?  We build our contracts on shorter terms with opt-out clauses to benefit our clients.  You’ll pay us for the work we do in the best interest of your company, not in the best interest of the contract.  Then you’ll be able to consider extensions after only a few months, or if the results just aren’t there, allow you to opt-out of the contract.

No one has every opted out of a contract.  A couple haven’t extended after a couple months, but the vast majority extend the contract and work with us long-term.  This setup, based on trust and mutual respect for professionals, allows us to provide great long-term results that drive ROI and profits to our clients’ businesses.

Mike LaLonde

(Digital Marketing Specialist at Londes Digital Marketing)

After creating his first website at 14, Mike hasn't looked back. He received a BA in Economics and an MBA concentrating in marketing and finance, both from Rochester Institute of Technology. Combining his quantitative education with a creative approach to online marketing, Mike helps the LDM team focus on developing creative solutions that provide long-term ROI for clients. In his spare time, Mike enjoys weaving latch-hook rugs, boondoggle, and making turkeys out of hand tracings.


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