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While at SES, I actually met three hedgefund investors. This is more than I’ve actually met in my entire life. I guess from what little I understand of financial analysis and what not, that their purpose for being there was to research which public companies may be successful, and which would fail miserably (so they could “short” the stock).
Meeting these folks made me realize I needed to write a bit of my thoughts on the valuation of the seo/sem industry in general and how things will shake out. Right now, there are a TON of SEO companies, and more coming into the market all the time. Some are dedicating their time and efforts to SEO/ SEM, while others just offer it as a value-added service. The point is, that there are probably way more than there needs to be for the extended future. The industry is still in the growth period, but in my mind has to be nearing a rolloff point of oversaturation similar to the way the web design industry became. So what will differentiate the GREAT companies from those that will wither away?
Firstly, I will say that I think there is potential for a lot of players in the industry, as SEO/SEM firms will really become similar to, or roll into traditional marketing agencies (which there are TONS of). Similar to the traditional marketing agencies, SEO/SEM firms may be large corporate entities or small one to two person operations. There is a need for both. The demand will be placed demonstratable performance based ROI. If you can get results and prove this to prospective clients, you just might last.
As for the larger companies, here’s my take on what creates value for a SEO/SEM company
(taken from this discussion):
- Human resources/ intellectual property (good people)
- Technology – Quality of Analytics/ Automation of systems
- “Network” reach (content, ad inventory…think about.com)
- Client base (great portfolios are the only way to attract the best clients, and long term committments look good on paper)
- Vision (good management)
- Process (Is the campaign methodology scalable and dynamic?)
SEOs/Internet Marketers are the new media PR people, and will be around for a long time. The question is which agencies will stick around and why.