Is the Pay-for-Performance SEO Model Still Viable?

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Every now and then I get calls from prospective clients asking for some kind of pay-for-performance arrangement for SEO. Usually these are one-man start-up operations with “a great idea” and very little money. Sometimes it’s a more established company just scared of entering into a long-term contract that will produce unknown results. Either way, the desire for such an arrangement is certainly a valid one, but not always one that can be implemented as easily as it sounds.

While I don’t think the pay-for-performance pricing model is entirely unworkable, I think the cons far outweigh the pros. Logistically the tracking needed to ensure fair and just compensation for performance adds additional layers to the total process, depending on the metric used for “performance,” quite possibly making the entire solution unwieldy for productive SEO.

Pay Per Ranking

Probably the worst metric that can be used for performance is rankings. The model usually goes something like this:

This model is easily adjustable to pay for top 3, top 5 or top 10 positions with different values being assigned to each position as well as each search engine.

The downside of this is that it doesn’t lend well to going after long-tail keywords. Surely a client will only want to pay top dollar for rankings on keywords that bring in the most traffic and sales. Long-tail keywords, which individually produce little traffic can collectively provide well over 50% of the total traffic stream for a site.

Pay for Traffic

Another mechanism used for tracking performance is to pay for traffic. With a measurable baseline, any increases in traffic can be measured with a dollar amount attached to percentages of increase. This gives the SEO free reign to go after both long and short tail keywords. However, this also allows the SEO to look for ways to drive large sums of unqualified traffic, which increases traffic stats, but will often provide little benefit for the client.

Pay Based on Revenue

This is probably the most fair pricing model, but also the most tricky to implement. It requires a fair amount of trust on the part of the SEO, believing that the client will fully disclose sales and revenue. But once those tracking mechanisms are in place it then becomes a matter of paying based on total sales, increase in sales, total profit or increase in profit, depending on the agreement. If based on profit, the SEO will have to take it on faith that the profit is as the company says it is, or ensure that they get access to the company books.

This model can be extremely lucrative for both the SEO and the client if implemented properly. However, this also brings us to the most significant downside of all pay-for-performance pricing models, and that is one of control.

Every time I’ve gotten into a pay for performance model I got burned. Each time I got burned it was due to having a lack of control over the site. Either we did not have direct access to the site in order to implement the strategies we knew would work, or the work we did implement was overwritten by the client. The most recent (and last) time that I ever agreed to go pay-for-performance was when a designer friend of mine asked me to get into a project he was working on for a client. I would get a cut of his revenue share for implementing the entire SEO strategy.

We spend many hours, weeks and months performing research, implementing SEO strategies, fixing problems and slowly getting the site to a place where the search engines would find it valuable. Then one day the owner of the site decided he wanted to switch to an entirely different back end system which threw all of our work out the window. He was convinced that this would generate more business for him, but it essentially made all of our time and hours a wasted effort.

While we never recouped our investment, but I did learn a valuable lesson of control. Even if I were somehow convinced again that a pay-for-performance pricing model was a good investment, I would not perform any SEO services unless I was given 100% control over the client’s website. This, of course, is something very few clients are willing to hand over. And I certainly wouldn’t blame them for that.

A good analogy for pay-for-performance SEO is that of a dietitian asking to be paid based on the amount of weight lost by a client they are consulting. The dietitian may set the plan, medications, workout schedule and menu for their client. But if the client sneaks Big Macs and Ice cream on the side, lounges on the couch instead of getting on the treadmill, or adds a few extra high-carb foods into their meals, then the weight lost will be minimal if at all. In this scenario the dietitian would be considered a failure by the client and therefore would not get paid.

This analogy may sound silly but it works very will with SEO. The SEO does the research, creates the strategy, and may even implement his work throughout the site. And the next day the client can wipe out all the effort the SEO put into it with a single decision.

Just as the dietitian is ultimately not responsible for what the client does with their body when once they leave the dietitian’s office, the SEO cannot be held responsible for what the client does or doesn’t do with the website if the plans outlined by the SEO are not being followed.

But when considering a pay-for-performance model based on profit and sales, it goes much deeper than just control over the website. The SEO may be able to implement strong optimization strategies that do a great job of getting qualified traffic to the site and entices people to either pick up the phone and call, fill out a contact-us form, or purchase a product. But that’s not the end of the story.

The process here on out is completely outside of the SEO’s control. They are not involved in customer service or how the business owner or employees interact with potential customers on the phone. Nor can the SEO act as a sales person for the company. Even still, the SEO is not responsible for the quality of products which are sold or ensuring great customer service. All of these things can affect the client’s bottom line, and therefore how much profit is achieved and shared with the SEO.

Does the SEO being paid for performance then have the right to tell the site owner how to run their business? Can they dictate the design of the site, forcing the client to make whatever changes that are deemed necessary, regardless of cost? Do they have permission to toss out all the content, train the sales staff or educate the team on customer service all the way down to how to respond to emails? Can the SEO veto product selection and have a say on quality, pricing and profit margins?

Most business owners would find this ludicrous. They would no more be willing to give up such control of their business than an SEO would, er, want to get paid based on how well the client runs their business.

While some SEOs have figured out how to make the pay-for-performance pricing model work for them, I remain skeptical. I enjoy helping others succeed in business, but I have my own business to run and have no interest in running someone else’s. If I wanted to do that, I’d just go and start it myself and be your competitor!

Stoney deGeyter is the President of Pole Position Marketing, a leading search engine optimization and marketing firm helping businesses grow since 1998. Stoney is a frequent speaker at website marketing conferences and has published hundreds of helpful SEO, SEM and small business articles.

If you’d like Stoney deGeyter to speak at your conference, seminar, workshop or provide in-house training to your team, contact him via his site or by phone at 866-685-3374.

Stoney pioneered the concept of Destination Search Engine Marketing which is the driving philosophy of how Pole Position Marketing helps clients expand their online presence and grow their businesses. Stoney is Associate Editor at Search Engine Guide and has written several SEO and SEM e-books including E-Marketing Performance; The Best Damn Web Marketing Checklist, Period!; Keyword Research and Selection, Destination Search Engine Marketing, and more.

Stoney has five wonderful children and spends his free time reviewing restaurants and other things to do in Canton, Ohio.

I agree with your overall assessment about pay-per-performance. When I occasionally enter into such arrangements, I want the numbers to be a lot bigger than when work for a monthly fee, as I am taking on some of the risk.

However, I see the various types of PPP a bit differently. Pay-per rankings is the best of them IMHO, as rankings are what the SEO can control the most. The SEO has no control over product quality, and so many aspects of conversion (other than the quality of the traffic he attracts), so share of profits is the model I am most hesitant to enter into.

I agree 100% on pay for traffic – that makes no sense. Nobody should ever pay for traffic, at least measured by volume alone.

@ David – I see your point on pay-per-rankings but I think there is a strategic downside to that. By paying for rankings the SEO either the keywords targeted will have to be too limited or the SEO will simply look for the easy to rank terms, not necessarily those that provide the most benefit to the client. Even with the client’s hand heavily involved in keyword selection, it is often that keywords are not as effective as originally thought they would be and a different set of keywords will need to be optimized. Does the SEO still get paid for the ineffective words? Or if the site is de-optimized for them, doesn’t the SEO lose out from all the effort invested in getting the rankings? Ultimately, the focus is on keyword rankings, not on business profits, which is why I don’t like it.

A good analogy for pay-for-performance SEO are given for us,For these useful information we are very thankful for you.

Great points, Stoney. As we deal primarily with small businesses & small budget clients we often are asked about some form of contingency pricing. In the end, with all the tracking necessary to make it work, it’s just not worth it for a client with a monthly budget in the hundreds, not thousands.

@David there is also the problem of personalized results (see Bruce Clay & others on the death of ranking reports). How can you bill clients when no one is seeing the same results?

Regarding the level of control needed, one has to wonder if it’s even worthwhile for the SEO to operate with full control of the client’s site. At that point, is it not more profitable to run your own site in that niche? Why have full control for a piece of the action when you can have full control – and no client headaches – for all the profit?

Ryan

@ Ryan – I agree with you completely regarding the level of control. which is why I don’t do PFP SEO!

At that point, is it not more profitable to run your own site in that niche? Why have full control for a piece of the action when you can have full control – and no client headaches – for all the profit?

Because of the overhead. Why would I want to take on the business expense when I can easily manage the site for a retainer fee plus dev costs and do pretty well. Get a few of those type relationships and its just like you had your own site without all the stress of overhead and employees.

PPP is a tough proposition for all involved. And, as pointed out above, it is usually the consultant who loses. Clients who are requesting this type of arrangement are best suited for offshore services.

PPP usually entails some form of guarantee also which we know is very difficult to offer these days. Performance guarantees can be laden with loopholes for both parties just like SEO ranking guarantees are. For me, the two are kind of synonymous with one another.

Usually with PPP, SERPs are monitored for performance evaluation. With Google’s recent moves to disrupt rank checking software, the PPP model becomes even more challenging for many. It just isn’t worth it. Not unless you’re dealing with Fortune 1000 and 6 digit compensation figures at which time there is some big money to be made. With the current economy though, I’m not too certain there is much of it being thrown around right now.

I too have gotten those calls over the years. A brilliant idea, a little bit of cash, and the need to sell someone on that idea and get them to contribute. I did that once in the beginning of my career. I worked for peanuts while making two college kids rich and famous. I learned from that experience too. I’ll never do it again. I’m going to get mine up front as we progress. You’re welcome to give me a bonus every now and then if you so desire! But, I will be compensated well for the time my team have invested. 😉

@pageoneresults No one said you have to have your own business & overhead. With pay per performance you are in a similar business model to affiliate marketing – which means the client has to compensate you at a rate higher than the going rate for affiliates, which might not be feasible or cost-effective for the client.

You can save yourself the PPP headache – and even the client relations overhead – by creating affiliate sites in that niche, where you have the control you want. And no operational overhead.

IMO the best model is pay-for-traffic. Traffic is our only responsibility. In order to accomplish that the client must agree on our recommendations which must remain implemented until the end of the contract. The client have the numbers to measure the quality of new traffic based on his conversion rate.

@Marcos Sorry – can’t agree. Traffic is far from our only responsibility. Targeted traffic is part of the responsibility, but usability and conversions are part of the deal.

Phew! A lot of good points in there. I prefer to get paid per hour and have a bonus linked to performance. It ensures that I get a minimum promised amount and if client can see the results they will be happy to pay the bonus.

Regarding the ‘traffic’ based performance payout, I think just the ‘organic’ traffic would be a good measure though people can always game traffic stats if it’s a short term contract.

BTW, is the ‘abc123’ a captcha kind of thing? In my case it was already there in the textbox.

I think the pay-for-performance model could be good if you can get a client to commit to 6-12 months of a ramp up and possibly a good initial financial commitment. Good luck!

One of my favorite subjects. The problem I often have with client engagements is that I can never convince them to pay me what the service is truly worth (at least my own inflated view of its worth) up front. My solution is to price the work at a fair rate (at least in the clients’ minds) but build performance bonuses into the deals so at least there is some potential for upside. It does get messy with tracking but I have found these kinds of deals to work out well for both parties. It’s definitely not for use with all clients though.

*Quote*Every time I’ve gotten into a pay for performance model I got burned. Each time I got burned it was due to having a lack of control over the site. Either we did not have direct access to the site in order to implement the strategies we knew would work, or the work we did implement was overwritten by the client.*/Quote*
I think you’ve been burned because of unwise contracts. Put clear requirements in the contract and as for pay. I think the 3 offered plans are weak because none of it gets you any money (if someone things screw up). So, I’d suggest you getting a base pay and if things increase you can implement one of those 3 pay plans.

*Quote*Does the SEO still get paid for the ineffective words?*/Quote*
I’d say yes, if the client picked them. If we did, that’s our fault and we should get something (if it still brings visitors, even if they don’t convert) or nothing (if no visitors come).
I’ve made many mistakes dealing with clients. Not having 100% control in the contract is the most deadly thing an SEO can do. It totally screws up your efforts and it makes things worse because if your strictly based off of a PPP, PPT, and/or PPR model.

So, I think the safest method (IF you want to go this route) is to have the client pay something (if they can’t then they shouldn’t be your client and get out of dream land, it costs money to make money, you can’t just start with nothing, typically) and if you perform, you get a structured bonus. Or if this is too ‘messy’ for your business, then just raise your rates. 😀

P.S. I thought you guys had ‘blockquote’ tags, I guess not. Please delete the above comment, since it’s confusing and this one is better. 😀

@ Realicity Internet Marketing – Honestly, I wouldn’t do it again unless I had a 3-year commitment to continue to pay me based on performance AFTER they disengage our services. That’s the only way to keep them from tossing you aside once they feel they are getting strong results.

@ Joshua, good points!

Sounds like some sort of hybrid model is best and even helps make the traditional payment model work better.

@Nathan

From my experience a hybrid is ideal for small to mid-size clients but doesn’t sit well with bigger clients. They want a flat fee of some kind. In that case, I give it to them, with an added zero. 😀

That way, they are happy, and your happy. Win-win. 🙂

*(Also, this is based under the assumption that you try to make EVERY SEO campaign a success, from large to small)*

Stony, a side-benefit of the hybrid model is that it gives the client the strong impression up front that you are confident of your ability to help them and you also value your services. I think this can go a long way to getting a client to “yes”.

I agree that the PPP model doesn’t work, mainly because I believe it fosters laziness. If a client gives me ten terms and I am PPP, I’m going to put my focus on the easiest terms, or lowest hanging fruit to ensure that I get paid. I prefer to focus on the terms that might be a little tougher but will bring the most qualified. traffic, not the most traffic

The best model is one that works for both you and the client. Too much focus on one thing can be detrimental to one’s campaign health which is where this conversation seems to be headed.

As an SEO working under a PPP model, I would surely be working towards developing applications that are going to drive traffic and revenue. I am not worrying about where we rank for specific phrases. That was the 90s, we are now in the 00s. Things come naturally if the foundation is set up properly.

I’m not even going to discuss the keywords with the client that much. You know why? Because I know there will be thousands upon thousands of them that drive revenue and I’m going to show the client that and prove my worth along with my high retainer fees. If you can manage the ROI, you can manage a pay raise every six months. Building applications and visitor engagement models is where the revenue is at. You need to bring those ideas to the table and have them implemented if working in a PPP engagement. This isn’t about ranking for 10 or 20 keywords. 😉

You want to do PPP? Then you better have an arsenal of talent to make it happen. Oh, and of course as mentioned above, everything in contractual form. Even then, I’ve seen Consultants get screwed. They’ll never learn.

P.S. I’ll concur, the styling options on these posts are not reliable and seem to be formatted incorrectly. It does make for a little bit of confusion as evidenced above.

From my perspective pay for performance SEO works really well for sites with a clear goal of grabbing first the most number of visitors for a given keyword phrase and tackling the long tail keywords at a later stage.

We agree with the client on a handful of top phrases and my work begins. After the initial on page optimization and tweaking of the pages it’s all link building work and we have very little contact with my clients. We contact them once a month to give them a summary of how we are progressing up the ladder, but otherwise we spend less than 1-2 hours communicating with my clients per month.
I like this model since I don’t feel I have to write long status reports with a lot of “fluff” to impress my clients and justify my monthly fee when I haven’t produced any results yet.

We also build into our contracts safe guards so we don’t leave empty handed if the client reorganizes the site or decides to just pack up and leave. Generally a 12 month contract is enough to produce top 10 results and the client agrees that if they take the site off line or do some major re-org they are liable for all the SEO fees based on top 10 ranking.

Very good insight into the challenges facing both website owners and professional seo service suppliers.

I recently blogged about this same issue and proposed a model where by a client is charged for making SEO changes – a flat rate agreed at the start – the more time spend on the website, the more the client pays.

Thereafter, if the client wants to agree a model for traffic and revenue that can also be worked out.

It’s tough though as many website owners are used to the PPC model – you pay X you get Y traffic – nothing about quality of traffic or increased revenue though – just traffic, so why should SEO be different!

We have tried a couple of these revenue share arrangements with clients and I’d have to say they really haven’t worked out. We tried to manage the revenue via the shopping carts, but found one client went as far as starting a second competing sales channel just to avoid our commissions.

If I could add two areas to seriously consider before entering into a PPP relationship:
1. These projects are often heavily front weighted in terms of expense. Ensure your contract length gives you enough run-out to payback the startup costs.

2. Just like all our clients – they will never contribute as much content as they promise! 🙂 Prepare for this in advance and document in a content plan. If they do not live up to your expectations of new content, make sure you receive compensation above the PPP splits.

Just a couple of expensive lessons learned I hope others can avoid!

Scott Jacob
Search Conversion LLC

Well be sure what you pay for – when you pay for performance. This method of paying invites for black-hat stuff, and you need to be absolutely sure what is going on.

Some of the pay for performance players also promise quick results – normally this could include grey or darker methods.

Keep in control – know what they are doing.

Steen Ohman
SEO Check – online marketing

Good content. Just wanted to add some points here that may be helpful for those looking out for professional SEO services. There are tons of SEO companies offering different SEO packages and solutions at highly competitive rates. However, when looking our for these services, its important to not only look at the affordability factor but also what is unique about their SEO service and what differentiates them from other companies.

While choosing an SEO company its equally important to analyze the SEO company’s website in terms of their Rankings, Yahoo links, Google index, Alexa ranking and similar such factors which indicates the company’s expertise in the field of SEO. So make sure you are doing enough research and smart work before investing your advertising spend.

@RKF That’s why I mentioned quality of traffic. If conversion rate goes down optimization has been done wrong. The point is for lead generation (offline conversions in general) only the client can calc his conversion rate. Thus he can evaluate whether service worth it or not for him.
About usability, I partly agree with you. I was assuming a decent website. Sometimes the client already have a contract with a webdesign shop or something like that and we can’t redesign from the beginning.
Nevertheless, I’m assuming ethical optimization wouldn’t mess navigation, content titles and page flow. No 20% keyword-density keyword pages and stuff like that (not to mention black hat).
Best,
Marcos

Like many in the business, I have had lots of these offers over the years. I agree that the best model would be the revenue share, but I also believe it should only be undertaken in the situation where the SEO had 100% control over the website AND was an actual partner in the business. This gives 100% transparency and removes any possibility of “not disclosing all of the revenue figures”.

That said, I also believe that most businesses who ask for PPP SEO greatly undervalue it and would not think it was reasonable to have someone become a partner.

Another work around would be working as an affiliate if they had a program set up or if you could manage and track the leads, but this would still require having the trust that the company operates with integrity. This is the only such arrangement that I have engaged in.

The pay per performance can’t be used as a viable business model with Google changing from one day to the next. There was a time when it was workable, but that time has long since past.

I have never agreed on this type of method. Too many variables that can go wrong. What if your idea of a job well done are different from a client which usually are than you could sit there doing work and never get paid.

Pay for performance cant be a viable business model any longer. With google’s algo changing so frequently, who can now guarantee to rank #1?

Childrens Beds

I think a hybrid model is a great approach.

The issue in my mind is risk. Your clients hate it (as does any business owner – especially of a small business). The idea behind PFP gets right at this point. You’re saying to your client, “I understand you’re concerned that the results won’t be there and the campaign will be a sunk cost – so cover my bases and I’ll share the risk with you. If you don’t win, I don’t win.”

Of course, we’re entering into a partnership of sorts with our client in this case. For that reason it’s got to be a cautious approach – and most of the time you won’t know your client’s business well enough to know whether you can take on that risk.

I always consider PFP at least in its hybrid form – but only for a business that is already profitable, and only when the client and I are on the same page with how things will be handled (and almost all of the control of the website, for the duration of the contract, is turned over to me).

With the right legal document in place you can work just about any scenario…

This is super article.

I’ve been tempted to become an Adwords expert in place of traditional SEO. I still may do this.

Thanks for your effort. I will pass this on.

While some SEOs have figured out how to make the pay-for-performance pricing model work for them, I remain skeptical. I enjoy helping others succeed in business, but I have my own business to run and have no interest in running someone else’s.

I certainly understand the frustration, but instead of making it super complicated, make it super simple and yes it can be done… we do it all the time…

Identify the search term phrases you are going to work on exclusively, make sure the client understands exactly what you are going to do to their website and if they choose to make a personal change and it wipes out your efforts, then they are still required to make at least a partial payment for your efforts.

We find the same clients with great ideas and little money asking the same thing, but it’s all about educating the client, working out a mutual agreed process and fee.

By limiting the clients expectations from the beginning you will have more control and a better opportunity to acheive the results you are shooting for.

We now also talk about the client utilizing more than one seo company at the same time, the client editing content while we are in the “SEO” process etc.

It does take time to learn what works and what doesn’t… but our experience tells us to keep it simple or at least as simple it can be.

If you really are a “Good SEO” provider and have the experience you will know pretty much in advance what you can and cannot do based on the clients type of site and service or product they want optimized to reach that #1 page.

We never charge for 1-3, 4-6, 7-10 positions… Our agreements place them on the #1 page period, if they happen to land on the #1 or the #10 we fulfilled our obligation and the final payment is do… If they land on #8 and want to move farther up, its another agreement… Keep it simple and you’ll make more money and have less frustrations.

Rich

Provokes interesting thoughts. I work from home, have few clients and a low cost base. In my locale many are sceptical about SEO so may be a pay by results method will work for me and my clients. Those where I am the webmaster and have total control and access are certainties and there is little additional tracking as we do that already. Agree with the general sentitment that without total control the model does not work / is high risk.

I’ve been looking for an SEO company but have to wonder how can everyone be at the top rankings? Seems like someone has to be left holding the tab at the end. I’ve been told so many different things that I don’t know what to do next. Not even mentioning that when it cost thousands of dollards. What is the best bang for my buck.

As a website owner who uses SEO services, I’d like to add my two cents. Many of us would be extremely grateful to and fairly compensate for quality SEO or SMO services. From our point of view, everything is stacked against the marketer. It’s just best efforts, and if the provider doesn’t deliver, they just move on to the next client.

I do agree that the SEO provider should have some clause whereby if it’s pay for performance, they can get paid over a long term, not get dumped by the client after doing good work.

Speaking personally, I consider a good business partner extremely valuable, and the last thing I would ever do is stop working with a good one just to save a few bucks. We have a decent SEO firm, but I’ve always wanted to connect with someone is much more invested and really goes all out to make things work. My email is service@laundry-alternative.com if anyone is interested.

Unless an agreement is made between the SEO and the Business Owner I dont believe that the SEO has in any way authority to tell the owner how to run their busiess/site. The SEO’s job is just that, to optimize a site for search engines. They should be allowed to make suggestions to the owner on how certain aspects may be improved upon.

I also think that PFP could be beneficial because as the SEO/SEO company progresses they will be paid accordingly which provides a bit of secuirty to the Business Owner/Site Owner

When as a client I enter into a PPP contract and I select the keywords that I want to perform well under, am I not guaranteeing that I am paying for relevant results? Would it make sense that the more popular a keyword/phrase is = the more the SEO will charge for top 10 results?

Unfortunately, there are a lot of problems with this scenario. First PPC is the ONLY way to guarantee placement. Even that is sketchy since the engines control whats decided to be most relevant. But if you can’t even control it on PPC, how much can you control it on SEO. Can anyone guarantee you’ll move higher than Wikipedia? No way.

Second, They keywords you select may not even be the best keywords. It’s like taking a car to the repair shop and telling him what tools to use. Ok, maybe not JUST like that, but the point remains. Most client’s don’t really understand what keywords will produce the best traffic, just the most traffic. Getting traffic is easy. Getting qualified traffic isn’t.

Tried pay per click back in the early days of the business, worked out to expensive. Then got my fingers burnt by an SEO company that was using black hat methods. Finally decided to have a go myself with moderate success.

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