SEO Compensation Conflict of Interest

I recently received a phone call from a friend asking my advice on engaging an SEO consultant to help them with their marketing activities. In this particular case the consultant had told them that they would increase their sales on Google and that they would clean up my friend's Google campaigns. My friend was skeptical but willing to entertain a quote from them. The consultants returned with a simple proposition, pay us 12% of the money you spend on Google each month (my friend had already told them how much he spent so it was an easy calculation) and we will clean everything up and increase your traffic. So, if you've been keeping up with my posts of late, especially this one you will know that I always ask, "How many more sales will I make if I make this investment?" but in this case there was something else wrong with this picture and I've seen it before, let me explain.

A few years ago a friend of mine was engaged in a similar arrangement with a similar company and they even offered to do the work for a percentage of the marketing spend. At first this seems like a good deal because you think you control the spend today by simply putting in a budget and in this particular case Google never actually used all of the budget each day so the total spent on Google at the end of the month was much lower than the budget. This is because my friend was not actively looking to spend that much money each month but instead was willing to spend at most that amount with the implicit understanding that really they only wanted to spend the maximum when the sales were adequate to support that level of spend. Now on the other side of the fence the consultant was looking at the maximum budget on Google and doing their calculation on that number, so not the current actual spend but the potential marketing spend... guess which one is usually a lot bigger. Now to make this matter worse for my friend, the one with the existing engagement, he wasn't tracking this consultant very well and so when the consultant told him that he was generating more sales and my friend saw that his sales had gone up a bit he trusted that it was because of the consultant. But here comes the rub, after the first few weeks the consultant came back to my friend and told him, truthfully, that my friend needed to spend more to make more and that there were missed opportunities to grow his business and thus my friend needed to
increase his marketing spend to realize these opportunities and so he did. What my friend didn't immediately realize is that he had also just increased the amount of money that he paid this consultant as well. Now, this would have been a great deal if in fact the consultant was bringing in actual sales and the profit for these sales was positive, but in my friend's case they were not.

So back to the original reason for this post, my view is that this relationship is a conflict of interest because the person who controls the decision to increase the marketing spend is getting compensated based on the amount of the spend so their natural tendency is to increase the marketing spend and to find ways to do this. This however is possibly at odds with your reason for hiring them which is not to increase your spend but to increase your profits and the two are not the same. You want to find the best set of marketing activities that costs the least and generates the most profit and this does not mean that you do this by spending more on marketing -- though that might be required.

Have a question or comment, email me, chris@xmodus.com.