It’s common to look back upon the past year and reflect upon all that has changed through twelve short months. For an industry as dynamic as that of search engine marketing — that’s certainly true. While I’m a solid two weeks late on my own schedule, I still wanted to share what I saw as the five most influential changes of 2006 for those in the SEM game.

#5 – Google Buys YouTube for $1.65 Billion
Everywhere else, this is the biggest item in 2006. I get it, and understand why. Please keep in mind though that my list is of the most influential changes of 2006. The core group of Internet users do not use video search to be productive online. If anything, they do it to kill time and productivity. As a result, I find this less influential than the rest of the list.

So why is Google’s acquisition of YouTube influential for those in the SEM industry at all? Well, even for a major company like Google — $1.65 billion is a lot of money. While the cash flow earned from their advertising programs and stock sales help to fund such purchases — it also leaves many doors open for Google to explore.

If Google can commit that much to the acquisition of a company, then one of two things is now likely to happen. Google with either continue to develop into offering services as if they were a full-scale ISP / portal – or — develop video search as a more productive and useful method to retrieving relevant information.

Google has technically owned YouTube now for just over three months — and so far, there haven’t been any notable improvements in video search. Still, it’s something we all need to keep an eye on as 2007 continues on, because if nothing else, we can expect Google to act quickly on this.

#4 – Mainstream Text Link Sales
Once more people began to understand how search engines used inbound links and anchor text as a major contributor for organic search rankings – literally dozens of text link brokers emerged. While some of these companies were very much in place before 2006 began, it was this past year that truly brought them to the front of the marketplace with millions of dollars changing hands in an effort to beat the system.

Simply stated, a budget for text link purchases became as necessary as that for pay per click advertising and directory submissions.

With more sites now inviting text links to be bought and sold, the search engines have begun to crack down on how effective these strategies can be. It’s been rumored that Google has begun automatic filtering when a large number of similarly formatted links emerge in a short time span. Other engines too have hinted at reviewing inbound links for similar behaviors for the purpose of adjusting the rankings.

For those in the industry, this is a huge change. Gone are the days of strategic link building campaigns – not because they rendered themselves ineffective – but simply because the masses have become too powerful to overcome. While there’s still hope that the weight and value of an inbound link will be more strongly considered – we can only sit back and guess at the true methods in which inbound links will now be viewed.

#3 – The Exposure of, and Reaction to Click Fraud
Since the first competitor stumbled across a paid advertisement, there has been click fraud. Denying it would simply show that you think that everyone else is naive — and Google was wise enough back in July to admit as much.

Google had Shuman Ghosemajumder, Business Product Manager for Trust & Safety, address the issue with a full Q&A following a $90 million dollar settlement in July. The exposure of the settlement and the entire case raised eyebrows and prompted a number of changes in the Pay per Click industry.

Just a few weeks before that settlement was made, Yahoo was also forced to offer a click fraud settlement while they improved their systems of fraud prevention. On June 28th, Yahoo entered a $4.95 million dollar settlement – and then began to make swift changes.

As a result of these cases, both companies agreed to work with other major players in the industry in an effort to better detect, police and education advertisers on click fraud. In my experience, the efforts and offers from Yahoo to its advertisers have been leaps and bounds ahead of Google’s. That’s not too much of a surprise, but it should make for another interesting thing to watch through 2007 as more evidence and attempts of click fraud continue.

#2 – Social Networking Sites and Birth of Social Media Optimization
Consider these quick facts from 2006… MySpace becomes more popular than Yahoo. Google enters the winning bid of $1 billion to handle three years of MySpace’s search functions. Social networks are the most searched for terms of the year on Google. The result? Social Media Optimization, or “SMO” now hits the scene as the next big thing. As Rohit Bhargava explains, the goal of SMO is simple:

Implement changes to optimize a site so that it is more easily linked to, more highly visible in social media searches on custom search engines, and more frequently included in relevant posts on blogs, podcasts and vlogs

SMO has become the hot topic dominating webmaster conferences and search industry seminars. More and more people are focusing on the marketing of their blogs and social media sites, and as a result – a new source for free traffic has emerged.

Less than five years ago site owners would create a site, add some backlinks from indexed sources, and wait for it to be indexed after the monthly Google update. Today, there’s a more instant gratification with the help of social networking – and strangely enough – effective SMO now results in stronger organic search engine performance.

Clearly, this trend will continue on through 2007 to further shape the industry as we know it…

#1 – Google Continues to Frustrate
When it comes to frustrating webmasters, web marketers and site owners – there’s usually one common villain: Google. The “minus thirty penalty” was our first true glimpse into some of Google’s automated penalization schemes.

Matt Cutts had eluded to those a bit this year when he said that…

“so we also look for problems and leaks in different semi-automatic ways. Reputable sites that sell links won’t have their search engine rankings or PageRank penalized–a search for [daily cal] would still return dailycal.org. However, link-selling sites can lose their ability to give reputation (e.g. PageRank and anchortext).”

First off, Google is their search engine. It makes sense and I understand why they continue to innovate and improve upon search. Unfortunately, a necessary evil in our industry requires them to also hold their cards close to their vest – which leaves us all questioning, speculating and at the very least, hoping.

Aside from the many business moves that Google made this year, there have also been a number of crack downs on those of us in the industry. From the referenced minus-thirty penalty, to “Quality Score” being enforced for AdWords buyers and beyond – one common theme has continued to emerge. We’re at the mercy of Google if we wish to make the most of their potential – and they’ll continue to throw their weight around.

The good news is that white hat SEO has made a number of strides this past year and it seems as though the industry itself is on an upswing again. That’s great for those of us who have made this industry the basis of our careers. Using the strengths of social networking to our advantage and keeping current with Google’s movements should propel us well into 2007. Just remember that while Google will continue to frustrate us as professionals, it will still continue to dominate in usage statistics. As a result, we need to buck up a bit and put our best foot forward to make the most of the sites we market.