When investing in or buying a company, taking a peek under the hood is all but required. Anything else, of course, is sort of like going to Vegas and betting a huge chunk of your retirement on black.
Generally, due diligence includes looking at a company's financials. From the top line to the bottom line, prospective investors and acquirers need to know how healthy a company is and where it appears to be headed. But when investing in or acquiring an online business, should investors and acquirers be paying more attention to the SEO profiles of the properties they're considering?
The answer would appear to be a resounding 'yes!' Google's recent crackdown on companies employing paid links and content farms has left little doubt: a traffic-denting penalty can be handed out to just about anybody.
That can be bad news for investors and acquirers. One of the companies that appeared to be hit hard by Google's Farmer update, Business.com, had just been acquired a few weeks prior. While it's unclear whether or not Business.com's long-term prospects were harmed, one has to imagine that the acquirer wasn't happy with the timing. Another company, Mahalo, was forced to lay off staff after the Farmer update. Mahalo, of course, is a venture-backed company and its ability to survive going forward would appear to be questionable.
With Business.com and Mahalo in mind, it appears obvious that investors and acquirers should paying close attention to the SEO profiles of online businesses that rely heavily on traffic from organic search. But an even more compelling example comes from a recent acquisition.
More recently, Google acquired BeatThatQuote.com for £37.7m. As SEOBook.com's Aaron Wall revealed, however, in an ironic twist, BeatThatQuote.com had been employing some shady SEO tactics to boost its rankings, including doorway pages, paid links and spam. In other words, Google basically acquired a company using some of the black hat and gray hat techniques that it frowns upon most.
Faced with that fact, Google booted BeatThatQuote.com from its index, temporarily of course. As Wall noted at the time, "From a competition & market regulation perspective that was a smart move for Google. They couldn't leave it in the search results while justifying handing out penalties to any of its competitors." He goes on to amusingly observe "The message Google sends to the market with this purchase is that you should push to get the attention of Google's hungry biz dev folks before you get scrutiny from their search quality team."
The interesting thing about BeatThatQuote.com is that, much like the J.C. Penney and Overstock penalties before it, checking a company's SEO profile isn't very hard to do. Free and low-cost tools like Open Site Explorer make it relatively easy to discover paid links and other SEO risks. The question then, is why are investors and acquirers -- including Google no less -- apparently not using these to ensure that their prospective investments aren't begging for a massive Google penalty? The answer: those that are smart probably will be soon enough.