In the last few years we’ve had a handful of clients ask us to adopt a performance based payment model. Usually these are start-up companies who are cash strapped and looking for an alternative to paying our service fees. I’m intrigued by the idea of performance based web work however I’ve yet to find a model which I believe is both fair and incentive driven.

I’m still trying to find the right solution. I’m not sure what works best, but I have a pretty good idea of which models I think will tank. Here are a few situations which we’ve been confronted with.

Ecommerce Web Site
The client was offering us a small percentage of overall sales along with a partial reduction in our regular hourly rate. The client was hoping that we would be incentivized by the offer they made us. There are several problems with this model for both sides.

1. What about offline sales, phone calls, emails or faxed orders? We can track the online sales but we have no visibility into the offline orders.
2. How competitive is the product / offering? We have no control over the price of the product or which products are in-stock. We could dedicate plenty of effort building a great system but if the client’s products are overpriced or lack selection then sales revenue won’t materialize.
3. How much is the client willing to pay for marketing? Our agency can do the SEO / SEM work but ultimately SEM and online advertising incur real costs, and not just man-hours.
4. What is the level of marketing they are willing to pay for and who has final say in terms of strategy and creative?
5. Our team could sit back and collect commissions for the client’s sale efforts. That wouldn’t be right, but under this sort of arrangement it could happen. Or vice-versa where the client could get away with doing nothing but filling orders.
6. What is the cap on the number of hours we would commit to each month? If we are spending 80 hours each month and sales commissions only equal $2,200 then our effective rate would be $27.50 / hr. If we agreed on a base hourly rate plus commission then perhaps hours wouldn’t be as important.

Lead Generation Website
In this scenario a client approached us to reduce our rate in favor of a lead generation forumula which incentivized us for creating “qualified leads” in Salesforce.com. To complicate the scenario we would be working with the client and other third parties including an SEO firm, Content Writer, and a PR Agency. The arrangement gave us 4 tiers by which our monthly charges were either reduced or increased based on performance.

We had an existing retainer in place which discounted our hourly rate by 20% for the commitment from the client for a fixed minimum of hours dedicated per month. This proposed program would start us at a reduced rate which is 40% less then what we typically charge. From that, if we perform well enough, we could make 20% back, bringing us to our current retainer rate. On the other hand, if the performance dropped, our hourly rate could go down to 50% of our regular rates. In my mind that is not an incentive, it’s a carrot and stick.

The proposed formula work like this:
Qualified Salesforce.com Leads / Total Unique Visitors = % Conversion

Here are the problems with this formula and the overall scenario.

1. What if the budget for SEM goes up and the third party SEM company starts driving 15% more traffic, but the traffic isn’t qualified? It will dilute the conversion percentage.
2. What is a Qualified Lead? In Salesforce.com we can drive leads but the aspect of qualifying them is arbitrary. Ultimately, that aspect comes down to trust but it sure would be nice to remove arbitrary valuation.
3. The SEO & PR companies are going to have the highest influence of the company’s natural rankings. If these two players hurt or hinder traffic then we suffer as a result.

We counter offered the client a true incentive program which kept our retainer rate at a discount of 20% while suggesting the incentive to reach full rates if we exceeded expectations. If we knocked expectations out of the ballpark, then we would be rewarded with a 10% increase to our regular rates, making work in this client particularly attractive. Unfortunately that suggestion was not accepted.

Does anyone else have similar stories to share? In browsing the web I found these.

GraphicPush: Commission Based Payment for Web Design

Manifest: The First Step in Creating Passive Income

In their perpetual quest to index the World’s information Google has now started a health record service. Users can add medical conditions, allergies, procedures, test results and drug interactions. Partnerships with Walgreens, CVS and Quest Diagnostics allow users to import current records into Google Health.

Google Health aims to solve an urgent need that dovetails with our overall mission of organizing patient information and making it accessible and useful. Through our health offering, our users will be empowered to collect, store, and manage their own medical records online.

The service was officially announced in February of 2008 and tested via a pilot program with Cleveland Clinic with great success and acceptance. Personally, I’ve never seen my full health record. I have zero clue as to how many, and what people have seen it so far, so the fact that Google is holding this data is perfectly fine with me.

We would like to introduce a new search engine optimization technique which we’ve nicknamed PASEO for Performance Adjusted Search Engine Optimization. The technique uses the external references, the tag-cloud concept and internal search to reinforce content within a site and encourage improved natural search rankings.

How does it work?
By parsing out referring URLs for search terms, PASEO calculates which terms are the most popular for a particular page. The same method is used by all the major search analytic tools. These terms are then listed in order of importance on the destination page. Clicking on any of the terms listed on the page will drive the visitor into an internal site search which helps the user locate relevant content for the end user.

The dynamically ranked PASEO tags help build relevant text links; thereby providing a positive feedback loop for when the search bots come to re-index page content.

Is this Black Hat?
No, it is not. We fully believe that PASEO tagging helps the visitor locate more relevant content, quicker. The technique is akin to tag clouds with the fundamental difference being that tags aren’t assigned by the end-user, rather they are driven by external influences.

Example.
Have a look at the Imulus homepage page tags on the bottom left corner; compare these tags to the page tags on our Solutions page.

Considerations.

• Given that PASEO is analyzing the referral URL it is wise to setup exclusions for terms which you may find undesirable.
• This technique isn’t foolproof and we feel others could expand on the concept by blending PASEO tag rankings with a combination of other Web 2.0 methods to tweak the results to be more relevant.

Just when I was starting to knock Google’s track record of innovation they roll out GrandCentral. While it isn’t truly a Google “innovation” what they will be doing with it sure is innovative. I’m not a user of it - yet, but it sounds like an awesome idea and I’m very excited about getting into the application.

If you never heard of GrandCentral, it’s a phone aggregator…. in a nutshell it will allow all your phones and voicemails to be managed under 1 account.

Here are just a few of the features I’m excited about:

• One number, rings everything
• Let people call you from a Web pageClick2call from your keyboard
• Call Record. Yep… record your calls… this will be fun to see the lawyers debate
• Voicemail notifications via SMS
• Mobile Access, similar to the iPhone visual voicemail

I can just hear the telecos whining about this latest invention by Google. But why are they doing this, I’m only guessing at this point but let’s follow the money for some clues.

• Phone based ads using AdWords
• Click to Call, perfect for tracking AdWords conversions over the phone
• Planting the seeds for the Google Phone
• Searchable Voicemail

OK, I’ve drank the juice and I haven’t even used this yet. I encourage you to visit the site and sign-up as well.

I’ve heard many search engine marketing specialist / experts give blanket recommendations to check Google AdWords once or more a day to make sure your ads are performing to their highest potential. Personally, I feel it’s misleading to give advice like this to the general AdWords audience. Unless you are managing a high transaction volume Web site or are in a highly competitve market for keywords then there really isn’t a compelling reason to check AdWords more then once a week. I suspect, but I have zero data other then intuition to believe that the bulk of AdWords users are small businesses with low-transaction sites. Sure, if your business is ecommerce related or receives a high level of transactions per day then the advice to check daily makes sense.

Here is my general guideline to maintaining Google AdWords. This is assuming that you’ve been running AdWords for more then a few months:

Check once or more a day if:

• Your margins on product sales are tight
• Your geographic scope extends to the National or Global level
• Your site is receiving over 30 orders a day under $50 an order or 5 orders a day over $50. Side note: We have a client who receives 1-3 orders a day over $2k per order and that site is only checked once a week.

Check once per week if:

• You are doing any ecommerce sales
• If you are using Adwords to generate leads

Check it a few times per month if:

• You are interested in shear traffic
• If you aren’t interested in tracking ROI in AdWords

I’m sure there are those who would debate these numbers but I think they provide a more accurate guideline then telling the AdWords user base to check their accounts daily.