SEOMoz + GetListed: Let The SMB Toolset Death March Begin

SEOMoz’s recent acquisition of GetListed has got me thinking — there’s a dangerous trend going on in the SEO Tools market. I call it the SMB Death March.

SEO Tool Market

The SEO Tool market has exploded over the past couple of years, and with good reason. These days, it seems like most businesses understand that showing up in Google is critical. More and more marketers have had some experience with SEO, either on their own or via consultants.

Hollywood is using SEO as a prime time plot device, and SEO crime has even become front-page news for the NY Times. Now, at cocktail parties, when you say you do SEO, instead of saying “what?“, the other person says something like “oh, you’re one of those guys. ” With this increase in awareness comes an increase in the number of people offering SEO services. Which brings us to SEO tools.

Since the mid-2000s, when SEO started taking off, the market has been awash in tools to help SEO pros be more productive. And as the industry has grown over the past few years, the SEO tool makers have started attracting venture capital. Companies like SEOMoz, BrightEdge, Conductor and Covario/Rio SEO have all pulled in venture money to help accelerate the growth of their businesses. And growth is what these investors want to see.

By all accounts, and by the sizes of booths at SMX shows, the SEO Tool business is growing rapidly. But, I wonder if that growth isn’t ripe for disruption.

SEO Tool Commodization

I like to think of SEO as a disruptive industry inside the big disruptor known as the Web, with tool makers selling picks and shovels to all of us prospectors.

In theory, SEO tool customers should be willing to pay a premium to a tool maker in exchange for either greater productivity or some other kind of market advantage. With the millions of websites in need of SEO help around the world, there should be plenty of demand for SEO tools.

But, while each toolset company has some special sauce; in general, it seems as if the feature set is becoming commoditized. Everyone has their version of a ranking report, on-page analysis, link analysis, etc., and if they haven’t built it in-house, then they are licensing data from the same sources as many others. Some do a great job at UX or creating a community around their service, but if you are just looking for a tool, you have several choices that are increasingly difficult to differentiate from each other from the lay-marketer’s perspective (I know guys, you all are different, but that may not be so clear to your customers).

On top of that, thanks to steady decrease in the costs of technology, hundreds, maybe thousands of SEO tool makers are now out there peddling their wares. I probably get an inquiry every other day from someone with a new tool. And, while they may not have the whiz-bang feature sets of the big-funded guys, in many cases, they are hitting the need of a specific niche, and they are often cheaper.

SEO Toolset Competition

Commodization leads to more competition and smaller margins. When that happens, players start to look for alternative growth paths and more market share. Which brings us to the GetListed deal and the SMB (Small & Medium Sized Businesses) market. I’m not saying that Rand Fishkin has been doing B-Boxes on his trusty whiteboard. In a lot of ways that has nothing to do with business plans and everything to do with cultural fit.

But, if I were in the SEO tool biz and saw increasing competitive pressure from above (SEOMoz seems to me to be a mid-to-low-priced service and some of the others mentioned above, based on anecdotal evidence, appear to be moving closer to them in terms of pricing), I would start to look down market and figure out how I could get there before anyone else and win.

The SMB market has long been coveted by digital service providers.  According to BIA/Kelsey, local digital ad revenues will hit $38B in 2016. SMBs are a big part of that spend. Who wouldn’t want to sell to them? A business that can serve tens of thousands of SMBs well could be worth a lot.

But, like Rene Belloq found, the path to the Ark is littered with the corpses of those who tried to get there before him/her.

Here’s the problem with SMBs:*

• They are hard to acquire as customers and are being pitched by everyone and typically have little/no time to talk to vendors, let alone figure out which one is best
• When you do acquire them, they tend not to want to spend a lot of money
• Once you start doing stuff for them, they tend to have a lot of questions/issues, etc., so customer support costs are high
• They tend to churn out at a high rate — many go out of business and don’t want to wait for long-term results or invest enough to get meaningful results, so providing great service at the low prices they demand is tough and they bail

The strategy d’jour seems to be to get to the little guys via their marketing agencies. I can’t tell you how many start-ups have pitched me lately on business models that rely on distribution via search marketing agencies that service SMBs. BTW, in many cases those agencies are SMBs as well, so the same challenges apply when trying to work with them.

I am not saying SEOMoz/GetListed is now on a path to failure. Given what I know of both organizations, I actually give them a pretty good shot at growing GetListed into a really interesting platform for SMBs and their marketers. More than most in our industry, they seem to really walk the talk.

(Full disclosure: I gave some minor advice to David Mihm before the deal and he bought me breakfast last week — Huevos Rancheros, BTW).

But, I do believe this deal, along with the market forces mentioned above, are going to drive other SEO tool makers to start making plans to go after the SMBs and their agencies. Which means a lot of money is going to be burned learning the hard lessons of Local.

Grab your popcorn.

*From Are SMBs Impossible To Serve Well, Google Et Al? 

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