How Adverse Selection Distorts the SEO Industry: A Market for Lemons

One of the most enduring concepts in university-level economics is George Akerlof’s theory of adverse selection, outlined in his celebrated paper “The Market for Lemons.” It illustrates a market failure where the purchaser cannot differentiate between high quality and low quality products, thus, there is often a dominance of low-quality goods or services. This idea is especially true in industries where quality is hard to gauge upfront––and few industries today embody this more than Search Engine Optimization (SEO) services.

In the case of SEO industry, clients might contract with an agency or consultant without a clear methodology to gauge the value of the work provided. How do you tell if you’re getting long-term, ethical strategies from a proper SEO profy?? Or is it more of the same tired strategies, shaddy links, and templated reports that look good but deliver little in terms of results?

This type of information asymmetry—where the seller knows much more than the buyer does—is a breeding ground for adverse selection

Why Is This Happening?

Several economic factors have combined to exacerbate the severity of this problem:

Search Results Are Ranked By Algorithms

There are more than 200 ranking factors in Google algorithm and it updates time to time (usually without public announcement). What this often leads to, however, is highly variable and even counter-intuitive results, even when one does everything “right”. It’s hard for clients to differentiate what ranking changes are a result of actual work versus other factors or luck.

Lack of Industry Transparency or Oversight

Anybody can claim to be an “SEO expert” and many people do, in fact. There isn’t a regulating body or certification process to assure quality work, so it’s possible for low-quality providers to saturate the market.

Buyer Inexperience

Most consumers, (especially small business) do not have the technical knowledge to distinguish good SEO work from digital fluff. They could focus on vanity metrics (e.g., traffic spikes), without a grasp of deeper metrics (bounce rate, link quality, domain authority).

The Economic Result: A Market for Lemons

In a classical “lemons” market, the inability to assess quality causes high-quality suppliers to exit or demand a premium on fees to recoup the cost of educating and winning the trust of the client. Meanwhile, poor-quality providers continue to flourish by offering cheap retainers, poor deliverables, and promises they can’t possibly keep.

This results in a weird ecosystem:

Some clients get randomly decent results (a Google update might see them rank despite poor SEO), and they stick around.

Others do not see returns and churn out, to be replaced by yet another hopeful business.

The SEO firm is able to survive, not by being consistently doing solid work, but by winning just enough of these random bets to maintain its credibility.

While one SEO agency may charge $1,500/month to give you real, working strategies that will last long-term and see results within 6–12 months, another may do it for the same price, but prioritize automated reports, spammy backlinks, and generic content on your blog. To the untrained eye, they look like they are doing some serious work. However, only one is creating lasting SEO value.

Real-World Data and Implications

More than 90 percent of online content has no organic traffic from Google, according to a study from Ahrefs conducted in 2023. For the most part, that means that most work in SEO, especially mass content and low-quality link building, isn’t worth it. And yet clients continue to pay retainers, month after month, because when it comes to a system as opaque as Google’s, it’s hard to separate correlation from causation.

For true professionals—i.e., real SEO Profys—this reflects a market failure. They have to devote a lot more time educating clients, providing custom audits, and playing the long game to distinguish themselves in any way. And then there are the low-quality firms who are busy focusing on churn, obsessing over marketing, and trying to extract as much value from their clients before they come to their senses.

Conclusion

Adverse selection isn’t just a theory—it’s happening every day in the SEO field. When quality is not observable at the time of purchase, sellers of low-quality services will control the market. This slowly erodes the trust that people have in the field, drives down prices and hurts the reputation of the entire industry. Until more transparent metrics, third-party validation or performance metrics are more widely accepted, the SEO “market for lemons” will continue to be not only a problem, but a lucrative business model for the wrong parties.