Why Invest in SEO: A Lesson in Compound Interest

By Thursday June 11th, 2020

SEO is similar to the effects of compound interest. With patience and consistent investments, growth becomes exponential.

What a time it is — sitting here writing this article amidst the chaos of spring 2020. There is confusion, anxiety, and panic, which causes bad decisions, lack of clarity, and sell off. What people really need to do is be calm, consistent, and make as few large overhaul changes to their approach as possible. Simply, stay the course.

I’m speaking as an investor and business owner. With all this chaos, it’s hard not to focus on only the short term, shut down all future horizon projects or investments and just get through the day. However, it’s the discipline to persevere and stay focused that will have compounding positive effects in the future, 3 months or 3 years from now when this chaos is in the rear-view mirror.

I often think of investing and long term marketing investments in the same light. It helps me to make sense of what’s happening and have some structure to my approach. Applying my financial learnings gives me perspective when building out a long term content strategy or SEO initiative for Brolik or one of our clients.

But let me take a step back: a lot of people don’t understand what SEO is and how it fits into their marketing strategy. I don’t blame them. There are a ton of scammy tactics and misinformation out there that lead people to think SEO is more complicated than it really is. In reality, it’s very straightforward. It’s not easy, and it’s not fast, but it’s straightforward.

It’s useful to think of investing in SEO like investing for retirement. The growth you see from SEO is shockingly similar to that of compound interest. It’s exponential.

Growth is slow at first, but it builds on itself. Until one day, the return you’re seeing is miles beyond your initial investment. And like investing, the best time to start was 5 years ago. The second best time is now.

What is the purpose of SEO?

Before we get too far, let’s define our terms. SEO, or search engine optimization, is all about making sure that your website shows up in search results, as high on the page as possible, by offering users the content that’s most relevant and useful to them.

Organic search drives 53.3% of website traffic, meaning if you’re not appearing in search results, you could be failing to reach half of your potential customers. In the same study, it was found that B2B companies get two times more revenue from organic search than from any other channel.

For local businesses, a solid SEO strategy is even more important. Google found that 28% of smartphone searches for nearby businesses result in a purchase. If you’re not showing up in those searches, your potential customers are buying from your competitors.

When deciding which search results to show to the user, Google uses the E-A-T guideline. E-A-T stands for expertise, authority, and trust. They’re constantly training their algorithm to recognize content that lives up to these guidelines. They made 3,200 changes in 2018 alone.

But their goal has never changed: serve up high-quality, relevant answers to searches. Every change they make is in service to that goal.

By providing what Google is looking for, you’ll appear in organic search results. It’s a bit more complicated than that — there are other crucial tactics, like link building, on-page SEO, and technical optimizations — but that’s the gist.

Is SEO worth it?

SEO is to compound interest as paid search is to simple interest.

Compound interest has been said to be the most powerful force in the universe. Years ago, I saw a graph that illustrated the difference between investing money at age 22 versus age 40. Take a look.

Image: Index Your Way to Retirement

Just through the power of compound interest, investing early and consistently results in a higher balance than investing much larger amounts later in life. If you’re waiting for the right time to invest, you’re waiting too long. Start now even if you must start small.

I have been actively investing for decades and seeing what time alone can do to your investments, there’s really no way to beat it. It was years of investing in good solid companies, adding money consistently into my portfolio, and adding a little more when a good company seemed undervalued. Then simply waiting and letting time do its magic. This long term approach is crucial to being successful as an investor, and some of the lessons learned as an investor can apply so well to SEO.

Small actions add up to big things over time. Prioritize consistency over hacking the system and long term mindset over short term gains.

This is exactly how SEO works. It’s additive. The work, time, and money you put into it don’t go away. They build on each other. And build, and build. Slowly at first, but it’s exponential. So eventually it reaches a point where growth far outweighs what you’re putting in.

In fact, the analogy stretches even further. We can say that SEO is to compound interest as paid search is to simple interest.

Image: Junto Digital

This graph illustrates my point perfectly. You can see the exponential growth of SEO. And you can see the 1:1 growth of paid search, where every dollar you spend matches each customer acquired. Clearly, SEO is a better long term play.

Yet, on the whole, we spend way more money on paid search. Why? In part because with paid search you can see immediate results. In part because paid search can directly track every dollar spent to actions taken and revenue generated.

Paid search can be a powerful part of your overall marketing mix, don’t get me wrong. But if you’re focusing on paid search and ignoring SEO, you’re missing out on massive untapped opportunities. Consider this: when you stop spending money on search ads, traffic and sales drop off immediately. It’s like that channel never even existed.

Compare that to SEO, which can continue to produce results for years later with minimal effort. Think of it this way — the more you spend on SEO now, the less you’ll need to spend on paid search in the future.

In addition, paid search and SEO complement each other. You can use paid search to guide your SEO strategy. It’s especially useful for testing keywords and informing your content strategy.

Plus, many people don’t click on search ads at all — and around 25% of people use an adblocker on their browser so they’ll never see search ads. Investing in SEO means that you’ll have visibility on SERPs, even when people don’t see your ads.

Let’s take this analogy all the way: just like investing, SEO is part of a balanced, diversified portfolio. You wouldn’t put all of your money in one stock. It should be spread across stocks, bonds, and funds, different industries and countries.

It’s the same with marketing channels. You want to spread your investment around so that the life of your business isn’t tied to just one or two channels. The internet is always in flux, and you don’t want to run the risk of one channel tanking your business.

How to get started with SEO

The first step is to determine your goals. Do you want to focus on brand awareness, customer acquisition, or something else? You need a goal that is measurable, so you can measure how well you’re doing.

Going back to the investing analogy, what’s your risk tolerance? Basically, how much time and money can you put into SEO before you need to see a return on your investment?

It’s always useful to know your business metrics before starting a marketing campaign, so you know where you stand. What’s your current CAC (customer acquisition cost)? What’s your CLTV (customer lifetime value)? Basically, how much money can you spend acquiring each customer, and still be able to make a profit? Here’s a helpful guide to get you started.

You also need to know as much about your ideal customer as possible. Do you have a target audience analysis? Customer personas? Do you know what’s important to them, what they value? Do you know where they hang out on the internet and what kind of content they like to consume? Do you know their browsing habits? Do you know what language they use when they’re searching for products like yours?

If you’re doing any marketing or sales at all, you should already know the answers to these questions. Otherwise, you’re flying blind, and you’ll have no idea if your campaigns are working properly. And even worse, you won’t be setting up your campaigns properly to begin with.

SEO is all about finding your customers out there in the wild west of search results. How will you find them if you don’t know what they’re looking for?

How much does SEO cost?

I get this question pretty often on sales calls. I usually try to push back, because it’s best not to think of SEO like a line item. SEO is part of a big picture, well-rounded marketing strategy. It does not exist in a silo, but rather is a companion to all of your other marketing efforts.

In particular, SEO is such an integral part of content strategy, from content marketing to brand messaging to website copy, that it’s just not useful to separate out the costs. Remember, the key to both marketing and investing is a diversified approach where your overall efforts are unified and your specific investments are working to balance each other.

And other SEO tactics, like link-building (where you get external websites to link back to your website), have more effect than just increasing your search ranking. After all, it’s not just Google’s algorithm that will see those links across the internet. Potential customers will see them too.

If you’re looking for an exact dollar amount, it’s not that simple. Just be prepared to invest consistently over time for best results. In other words, it’s not a one time cash infusion – think back to the saving for retirement analogy.

How do you know if SEO is working?

Remember, SEO is a long-term game, just like compound interest. In fact, you might not see a significant return for 6 months or more. How long the process takes is also dependent on other factors, like the age of your website, the competitive environment, and the quality of your current content.

But there will eventually be signs that your SEO efforts are working. If you’re focusing on more relevant keywords, your traffic may drop as conversions go up — because you’re reaching more relevant customers. Or you may find that traffic and conversions are slowly rising. Other website metrics, like time on page and bounce rate, might improve, meaning you’re appearing in more relevant searches and your content is of a higher quality, which is keeping people’s attention for longer periods.

I urge you to be patient, and keep (or start!) investing in SEO. Invest steadily, and growth will be exponential. Starting now, even in small doses, will make you much happier (and more successful) five to ten years down the road. As you continue to invest, the work will get easier and you’ll benefit from the positive momentum. Your content ideas and quality will continually improve, and you’ll get better at seeing the opportunities beneath the surface. It’s one more way to solidify a competitive advantage… you do the hard thing while your competitors fall behind.

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About the Author

Jason is co-founder and CEO of Brolik, a digital agency in Philadelphia. As an entrepreneur, Jason is passionate about helping other business owners navigate the complicated journey of owning a business and developing marketing strategies to grow their brand.
Follow @jaybrew on Twitter or connect with Jason on LinkedIn or Google+