Mark Jackson at Search Engine Watch published a post yesterday about an interesting concept: performance-based compensation for SEO.

In it, Jackson describes a panel discussion at the Search Engine Strategies conference that took place in Silicon Valley last week. The panel, “Performance Pricing Models: What Every CMO Must Know“, broached the subject of performance-based pay for SEOs.

According to Jackson, “the panelists seemed to agree” that “SEO has so many variables to consider that [such a model] can be incredibly difficult to pull together“. He did note, however, that many marketers in the audience were interested in the possibility, for obvious reasons.

Jackson goes through all the things he thinks would need to be in place for a performance-based compensation model to work. These include analytics tools that are up to the task, the right metrics on which success is measured, an understanding of responsibilities and capabilities, and perhaps most importantly, the requisite level of “participation, collaboration, and cooperation“.

Generally, most SEOs (and full-fledged agencies offering SEO services) won’t have clients with all this in place. The amount of risk that these providers would incur by accepting performance-based compensation is therefore too great to make sense in most cases, especially in light of the fact that a lot of the success and risk factors can’t be controlled. Because of this, I don’t expect we’ll ever see performance-based pay become a common practice in the SEO market, although there’s plenty of room for greater use of incentives.

That said, I think the discussion of performance-based pay is a worthwhile one. There is a lot of opportunity out there for skilled SEOs and the most entrepreneurial of the bunch could probably swing some potentially lucrative partnership, revenue sharing and/or equity deals.

Already, I know of deals made between domainers and developers, for instance, in which the developers are given the opportunity to develop valuable generic domains in exchange for a slice of the revenue. In many cases, it looks like a win-win: the domainer may not have the skills or time to develop the domain, the developer gets to build a potentially lucrative online property using a domain that someone would probably kill for. Given that PPC revenue has declined for many domainers, developers who know lead generation/CPA inside and out may be especially well-positioned in this market.

So back to SEO. While we may not see performance-based pay take hold in the SEO market, given how good SEO can take an online business from nothing to something, it certainly wouldn’t surprise me to eventually see a growing number of the most skilled (and financially-secure) SEOs employ more entrepreneurial business models.