Wednesday, November 15, 2006

Due Diligence of SEO Techniques

SEO Due Diligence for Acquisitions

In acquiring a firm whose marketing is primarily online, the acquirer needs to enter a whole new type of due diligence of seo.

This might sound esoteric but imagine this:

Company B gets 5K visitors/day to their site prior to the acquisition. Following the acquisition, in the first month, the number drops in month 2 to less than a thousand visitors. The revenues decline proportionately to under 20% of the pre acquisition number.

When the new management reviews the historical traffic records, they discover that most of the traffic traditionally came from three domains. Despite the info in the whois database, there is no way to contact these domains and no traffic coming from them.

The sellers of the company have moved on and are not available to answer questions.


What happened? In this case, it's likely that the original owners had a number of sites that they owned. The traffic and revenues of Company B were based on traffic delivered from other sites which Company B was not visibly paying for. Thus it appeared that the traffic was based on success in natural search. When the original owners sold the company, they redirected the traffic flow elsewhere. Since they own the sites in ways that are difficult to trace, it is impossible to prove. The buyers acquisition agreement did not address this possibility in the declarations or "representations and warranties". The origin of the traffic was not analysed in the preacquisition due diligence seo process but, if they were important traffic contributors, they should have been analyzed.

Here's a much harder scenario to detect and track...

Company C gets 5K visitors/day to their site prior to the acquisition about 90% of it from the search engines through "natural search". Following the acquisition, in the second through sixth month, the number drops to less than five hundred visitors. The revenues decline to under 10% of the pre acquisition number. When the new management reviews the historical links, they discover that there used to be about 1000 links in and there are still about 1000 links in, there is no detailed analysis of the links.
What happened? This is a nearly untrackable problem. The original owners had built a large link count of mostly junky links. However, amongsth the 1000 links, there might have been 5-10 that were controlled by the owners which had significant page rank and were, prior to the acquisition, pointing all of their link power to the website that was about to be sold. Following the acquisition, these sites were redirected and the result is that over a few months, the new owners observed a fall in page rank but they could not track the high page rank back to the sites that disappeared.
If online marketing systems and traffic are a component of the value of your acquistion, get an expert to do your analysis.

Good due diligence SEO issues:

- where is the expertise in SEO? Check it out. Interview? Writing? Training?
- What mechanisms are used?
- is the traffic really from 3rd party sites - check it
- are the techniques white hat or black hat (with a limited shelf-life)?
- where does the traffic come from?
- is the seo success due to links pointing to the site which are truly 3rd party or related?
- history of links & traffic patterns. Understand it...
- involvement with buying traffic thru PPC, network marketing, email marketing etc etc
- etc etc

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