In the last decade, there has been a tremendous surge of interest in Internet search engines, both as information-seeking vehicles and as an online advertising media.
There are two types of online advertisement associated with Internet search engines: paid placement and Search Engine Optimization (SEO). Paid placement is operated in the form of sponsored or paid results, which displays an advertisement in a search result page. Search engines charge placement fees tied to the price of the relevant keywords, which is primarily determined by auction and measured by CPC (cost per click), and the number of click-throughs the advertisement receives.
SEO, on the other hand, is the practice of optimizing web pages in a way that improves their ranking in the web search results, which reflects relevancy in searchers’ standard. Advertisers pay SEO firms to attain better outcomes. SEO is becoming more and more popular both for the search engines and for the advertisers. This situation is due to the reason that the keyword cost increases almost 20% per year, and “organic results” in search engines are more appealing to searchers because these results are considered more objective and unbiased than sponsored results.
This article considers what factors the sustainability of SEO firms depend on. It arrives at the conclusion that this is dependent on: the proportion of sponsored results returned, the algorithm robustness. It suggests that decreasing the number of organic results in a search engine could potentially threaten the SEO firms in the industry. However, there is also a limit with regard to this proportion, because it is understood that the majority of users of search engines in fact prefer organic results over sponsored results.
Secondly, algorithm results have a “monotonic negative effect” on the sustainability of SEO industry because this factor directly limits the practice of SEO. Therefore, the search engines could improve its profit through learning constantly and “outsmarting” SEO firms, so that its results are less vulnerable to SEO practice in general.
Another issue regarding the SEO industry raised by the article is that the search engines can be subject to “free-rider” effects because of SEO firms that are parasitic in nature. As the search engine invests in algorithm effectiveness improvements, SEO firms also benefit from this situation. Therefore, this increases the incentives for the engines to invest in increasing algorithm robustness, whose example can be found at the Google Dance Syndrome. This syndrome is the name given to how Google modifies its search algorithm in ways that are not visible to the average searcher but makes a drastic change for SEO firms.
If the landscape is structured such that there is a leader in the search engine industry that has a higher algorithm effectiveness, the pressure from SEO firms is higher on the leader in the industry. The “follower” feels only a limited pressure, because it only covers the “residual demand” left from the leader. This relationship is exemplified in the case of Google vs. Yahoo, the latter of which has lower incentives to invest in improving the robustness of its algorithm. Therefore, massive updates of ranking algorithm have seldom been observed with Yahoo. This follower position offers an additional benefit to the follower in that SEO firms are less likely to sustain.