On the surface, URL shortening services such as http://bit.ly are a great idea, because they can turn long, messy web addresses like this:
Into nice tidy addresses like this:
This is especially useful for posting to Twitter, since it saves valuable space, but a lot of people have got into the habit of using URL shortening services all the time.
There’s an obvious problem with this from an SEO point of view. For a start, the shortened URL contains no anchor text, and secondly they do not pass on PageRank. Since these two things are fundamental to Google’s ranking algorithm, any links to your company website that use a URL shortening service are practically worthless in terms of SEO value. They will do nothing to improve your site’s ranking for the relevant keywords.
[EDIT] As pointed out in the comments, it seems bit.ly and other URL shortening services do pass on PageRank (a few of these services do not) but the anchor text issue is still a problem, links without embedded keywords don’t provide much value.
But that’s not all. As the recent closure of http://tr.im has illustrated, sometimes URL shortening services go out of business and that means that all those millions of links on the internet which use that service will suddenly stop working.
So the long and short of it is: for online PR purposes URL shortening services are best avoided where possible, but sometimes they’re necessary, like on Twitter.
Here’s the really interesting bit
But there’s more to this story. They may have certain disadvantages and risks, but as long as Twitter is going strong, it’s fairly certain that bit.ly will be doing quite nicely too (did somebody say buyout?) and that creates an interesting situation.
Twitter is a hotbed of viral activity, with news and trends being retweeted backwards and forwards, spreading across the web faster than ever before. Given that bit.ly is rapidly becoming the de-facto URL shortening service, it is an amazing and unprecedented position in that it has access to a live, detailed view of these trends as they are developing.
Before anybody else knows what’s making an impact on the web on any given day, the people who run bit.ly will already have a clear picture of what people are looking at, what is spreading around the web, and how it’s spreading. If they’re smart, they will already be analysing that in all sorts of clever and interesting ways to figure out how they can extract value from it.
For most web users, bit.ly is just a handy way to make unwieldy URLs a bit more manageable, but for businesses it’s a goldmine of up to the minute data on consumer trends and behaviour, on an amazing scale. I wouldn’t be at all surprised to see bit.ly selling customised dashboards to provide businesses with snapshots of that data in the future.
Twitter’s business model may still be a bit hazy, but it’s certainly created fertile ground for bit.ly to develop into what could be one of the most powerful and valuable business tools on the web.
[UPDATE] It seems tr.im has decided to stick around after all – although the service’s owners have a few things to say about the relationship between Twitter and bit.ly