Update (26th September 2014) on Google’s announcement of the release of their 27th algorithm update, Panda 4.1. The update started rolling out earlier in the week with Google saying that depending on location, about 3%-to-5% of search queries will be affected which is slightly smaller that recent updates (Panda 4.0: 7.5% of queries). Panda mainly affects on-site elements (content) and the latest iteration is targeted at improving the algorithm to reward the best content and allow the highest quality content to rank well. Google have reportedly taken on webmaster feedback to improve the identification of high quality content so that it may be the case that sites negative affected by Panda 4.0 (May 20th 2014) could be positively affected this time. Webmasters will know by the end of the week whether they have been affected either way from the update. We will be updating our penalty indicator to reflect this so make sure to use it when evaluating new sites for acquisition over the coming weeks.
The latest update comes four months after the last, which suggests that this might be a new quarterly cycle that we’re on. Panda had been updated on a roughly monthly basis during 2012. In 2013, most of the year saw no update at all. Penguin 3.0 remains overdue (based on precedent) but the latest indications from Google are that it will come before the end of 2014.
Late last night, Matt Cutts tweeted about rolling out a new Panda 4.0 update today.
At this stage, it is too early to comment on the winners (or losers) and on what particular attributes were impacted – this is a new update so there will be a combination of new factors and edits to old factors, too. For those of you who have been following us for a while, you will know that our penalty tool is useful in indicating whether a site has been affected by a penalty and/or an update such as Panda. We will be updating it to reflect the latest update in due course as we have the chance to track more empirical data.
Since Google first started rolling out various major Panda updates/refreshes in 2011 the website buying/selling industry has become more and more aware of the risks of reliance on search traffic.
One of the metrics we use internally when valuing web businesses is the percentage of traffic that comes from search engines (particularly Google) as this is arguably risky compared to other forms of traffic (such as an opt-in email list). Generally speaking, the higher the percentage of organic traffic, the lower our valuation will be – although there are a number of subjective points built in such as the quality of the link profile and the site history.
As a brokerage business, we have been proactive in ensuring the sites we sell are quality businesses and reject the vast majority (approximately 95%) based on various factors in our extensive pre-listing due diligence process. Whilst updates like the latest Panda can effect legitimate sites, quite often it proves beneficial to quality web assets while reducing the rankings on poor quality sites. Personally, I welcome the updates and expect the quality of our listings to speak for themselves.
For the more sophisticated buyers out there, the next few weeks could prove a strong opportunity to acquire distressed assets. Webmasters often panic when their sites are affected by updates as it can wipe out a lot of value overnight. I like to look for sites that have proven models of profitability but have just lost their main source of traffic (specifically Google, if we are referring to sites affected by an update). From the previous earnings data, you can calculate what an organic visitor was worth to the site and then figure out how replaceable that traffic source might be.
For example, if I saw a site that was previously generating 20,000 unique visits a month (or “users” in the new Google Analytics) and it was generating $10,000 in revenue, each visitor would be worth $0.50 (the assumption being all visitors are equal). If I could replace the search traffic the site had just lost with Facebook PPC at an average $0.40 a visit the site would become profitable again (I would make $0.10 per visitor profit). Obviously, not all traffic sources are equal and visitors will behave differently depending where they came from, but this more unconventional acquisition strategy can be particularly effective during times of uncertainty for website owners.
We will be keeping track of the effects of the update as it continues to roll out, but please let myself or any of the team know if you have any particular questions regarding how this might affect you and we would be more than happy to help.
For those of you who want some bedtime reading on the Panda 4.0 update, here is a short list I have put together of articles I have been reading today: