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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.

Patricio Robles

Published 1 April, 2011 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

2377 more posts from this author

Comments (5)

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steveplunkett

Did a presentation about this at PubCon Vegas, it fell on deaf ears.

over 5 years ago

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Andy Heaps, Operations Director at Epiphany

I've thought for a while that companies buying websites should be employing search specialists to carry out some sort of due diligence.

The main problem is that often, they don't know they need to do it and so don't. Also because rankings algorithms are obviously guarded any due diligence would be very subjective - what is very risky to one person isn't necessarily to another. And as we see day in day out the reality isn't what is stated in the Google guidelines

over 5 years ago

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Maciej @ Brandignity

I think looking at SEO metrics for a company purchase is a rather large must. For starters a new website depending on the business could be quite the expense and most often overlooked during an acquisition. If SEO has never been done before than starting from scratch can also be time consuming and costly.

over 5 years ago

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Nick Stamoulis

Taking a look at a company's SEO will tell you a lot more than just where their links are coming from. It can also give you an overview of their online reputation and brand presence. If you're making a company purchase, don't you want to know how much work you have on your hands?

over 5 years ago

Ashley Friedlein

Ashley Friedlein, Founder, Econsultancy & President, Centaur Marketing at Econsultancy, Centaur MarketingStaff

I've always thought that 'good', strong, natural search rankings should be considered as more of an IP asset than they currently are. All the more so given the way the algos are going.

I think most buyers/finance types look just at levels of traffic, growth patterns, and don't always understand the 'quality' of that traffic by looking at sources of traffic e.g. anyone can buy traffic with PPC, affiliates etc. but good email traffic shows better quality, as does strong, reliable, 'ethical' SEO traffic.

The truth is that it is now very hard to rank well on SEO, particularly for valuable/competitive terms, and even harder to rank *quickly*. Almost no amount of money will achieve long term, high rankings, very quickly.

So strong natural search rankings, built over many years, based on a diversified set of high authority links, accrued over time, as a result of good content that quality sites have *chosen* to link to, is a very commercially defensible position with high barriers to competition. And should be valued as such. Equally, you are right that 'dodgy' SEO (e.g. content-farm driven short term rankings at the mercy of an algo tweak) are highly dangerous.

over 5 years ago

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