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Are you covered? Insurance & Risk Management for Internet Development & Marketing Companies
By Shalom Issenberg | May 5, 2008
I had a meeting with an “Insurance & Risk Management” consultant about a month ago. The purpose of the meeting was to identify risks associated with services, specifically in terms of liability for potential claims related to loss and damages.
Many web development and SEO/ SEM companies underestimate the risks that exist in our industry.
The main concern for my consultant was the potential for a client to claim loss or damages connected to their brand’s reputation or market position on-line. Compensation related to claims may extend to losses pertaining to investment costs as well as anticipated future proceeds.
3 main factors that contribute to risk:
1. Outsourcing
- Using offshore development companies may expose you to a variety of risks: time delays in deliveries, malicious scripts, lack of accountability, poorly designed scripts that may create server vulnerability, etc.
- Confidentiality and Privacy: if you are handling an e-commerce project or a secured database with customer client data outsourcing may add risk for credit card or identity fraud.
- Outsource companies can steal your ideas after developing to use internally or resale.
- Outsourcing parts of SEO can lead to bad on-line reputation if spam techniques are employed or even a ban from the SERPs if “black-hat”techniques are used.
2. Guarantees & Result Based Services
Offering guarantees for SEO is one of the biggest traps. On one hand your clients want to hear the guarantee – even if you don’t want to give it to them. Many times this is a struggle for SEO professionals who understand that it is what the client needs to hear. Be fair to yourself and the client – don’t give in, don’t make promises you can’t guarantee!
Some companies will try to incorporate commissions or fees based on results, this can be dangerous as well. I once saw an SEO company charge $500 for a number 1 ranking, $100 for a top 5 and $50 for a top 10. The problem became that a top 10 ranking proved to be meaningless for many of the keywords they were being charged for. Also rankings don’t guarantee traffic and traffic does not guarantee business success. Don’t sell people what they don’t need!
3. Poorly Defined Contractual Terms & Conditions
Your clients don’t understand your job as well as you do. But you have to make them understand clearly what it is you will do. Avoid misunderstandings that can later become the basis for claims related to undelivered services.
Be careful in terms of structuring deals and writing contracts or service agreements. If necessary look at how other “larger” firms propose service contracts (not that I encourage it, but you can always pretend to be a potential client).
…Another area of risk that you should not ignore:
Technology Risks
Viruses, Malware, Hackers, etc.! The wrong malware on your computer can hack your Adwords account and spend your clients money on “spammy” ads (potentially hundreds of thousands of dollars in minutes). Trojans can hijack customer mailing lists. Viruses injected into your clients websites may access visitors’ computers in order to gain banking and other personal information.
For PPC managers… should you be concerned that your client will hold you responsible for marketing investments lost to click fraud?
Every business owner needs to consider risks; Internet professionals are no different! Speak to a trusted business insurance consultant or broker. If you offer your services internationally make sure your insurance consultant understands this.
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