Google regularly changes its algorithm and it’s a smart move because all the companies that were trying to game Google — and were succeeding in taking advantage of the some 200 rules that make up the algorithm — get shaken out of the results.

It’s a quick way of finding the most egregious gamers of the system.

And Google’s recent release of its “Panda” algorithm update was designed to find quality sites and raise them in the search rankings.

But Panda is causing a lot of pandaemonium for all types of businesses, those that played by Google’s “white hat” SEO rules, and those that didn’t.

The Panda update was supposed to punish sites with low quality content, such as content farms churning out millions of articles or videos of mostly mediocre quality. And to some degree, Panda did what it promised and demoted some of the more visible content farms like Demand Media.

Sistrix, which sells software that monitors keywords and traffic, published a chart showing Demand Media’s ehow.com as the biggest loser.

Yesterday, Demand Media acknowledged there was a negative effect from Panda but that the drop in traffic was “overstated” and that its financial forecast remained unchanged. However, some investors were discouraged, which led to a drop of around 13 percent in its stock price.

For large companies such as Demand Media, it is easier for them to deal with algorithmic changes because once they figure out the new rules of the game, they can scale that across a massive amount of content.

However, smaller businesses, especially those that thought they were playing by the official rules that Google sets and still got punished in the rankings — are less well equipped to deal with the loss of a good ranking. It’s another example of how the Internet favors scale in online business.

Google now says that “quality” is important to web site ranking. Amit Singhal, Google Fellow, recently wrote about the change in a blog post:

Based on our testing, we’ve found the algorithm is very accurate at detecting site quality. If you believe your site is high-quality and has been impacted by this change, we encourage you to evaluate the different aspects of your site extensively.

So the answer is simple: raise the quality of your content and regain your prized listing in Google’s search rankings.

But what is quality content?

Take a look at some of these comments from the Sistrix blog in response to the Panda upgrade:

Rose:

The unfortunate thing is that it did not only affect the big guys, but more so the little ones. I have spent nearly two years writing REAL, unique content articles. I used Ezine Articles and Hub Pages to post them. They got hit and now my site went from PR3 to PR 0….NEARLY TWO YEARS, AND HOURS AND HOURS OF WORK DOWN THE DRAIN!

JimF:

My website has lost tons of traffic in this algorithm change. Yet it is nonprofit, I am considered an expert in my niche, all the content is entirely original and written by me, and it gets 100K unique visitors a month. I’m at a loss to explain how my SERPs (and traffic) have dropped in this algo change.

Rod:

Content farms down, and quality sites up, MY FOOT! I see more of the exact opposite, where original, quality content took a big hit, while more spammy sites remained, or floated to the top.

Markus Bauer:

Google is definitely not able to “understand the value of professionally-researched and well-written content” in an algorithmical way, but they are able to read the signs (respectively interpret the signals) indicating the opposite.

Mr Bauer makes a good point: can Google’s algorithm be made to understand the difference in “quality” between one piece of content and another?

Google often states that its goal is to find the most “relevant” link — that’s not the same as finding the best “quality” link.

After all, its search results are based on evaluating relevant data such as location, age, gender, surfing habits, and more recently, social networks.

“Relevant” is clearly different from “quality”. Yet in the Panda update “quality” assumes a greater weight in Google’s calculations.

But how can “quality” be algorithmically defined?

It’s difficult enough to define using language, which has room for lots of ambiguity. So how can it be defined numerically?

In the popular book of the 1970s, “Zen and the Art of Motorcycle Maintenance” the protagonist’s search to define the meaning of “quality” becomes a metaphysical quest that eventually leads to insanity.

We can’t afford an insane Google, it’s too important to global commerce.

And we can’t afford to have millions of businesses trying to figure out what “quality” means to Google — it’s an insane waste of time trying to guess what Google’s secret algorithm is measuring.

I’m very much of the opinion that businesses should optimize for their customers and not for the searchbots — let the search engines optimize themselves.

If you optimize for your customers they will come back again and again. They know where you live.

If you rely on SEO for your traffic that’s like smoking crack — you have to keep doing it.

There is nothing about SEO that improves the user experience of your site. But if you invest money into improving the user experience, it will build loyalty and traffic that is independent of what Google does, or doesn’t do.

Surely, the best strategy for any business has to be Google independence.

[Cross-posted at Silicon Valley Watcher]