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Over the past couple of years, I've been telling many small business
marketing people (basically anyone that would listen) that SEO (Search Engine
Optimization) has one big advantage over PPC (Pay-Per-Click). SEO is
strategically better because if you are able to somehow find an edge or
advantage, you're likely to hold on to this competitive advantage longer with
SEO than you would with PPC.
The argument comes down to this: Since PPC is based on a a near real-time
auctioning process, it's really hard to build advantage and keep it.
Before I dig deeper into this, I wanted to give credit to Aaron Wall from
SEOBook.com for sparking this article. He had a recent post titled "Your Laziness: Why I Love SEO So Much More Than PPC". I'm a
big fan of Aaron because I think he really gets SEO at varying levels of
abstraction. Aaron's article is worth reading, even though it's focused a bit
on the affiliate marketing business. The core concept is still the same.
I'm going to look at this issue of SEO vs. PPC from a startup strategy
perspective (because that's a topic that I'm particularly interested in and
passionate about).
What's Your Sustainable Competitive Advantage?
If you've ever talked to venture capitalists to raise money for a startup,
you've probably been asked a variation of this question.
Here's the question, rephrased for lay people: If your startup is successful
(you start making insane profits), what's going to stop other people that are
enviously looking at all the cash you're generating, entering the market, and
eroding your profits? What gives you advantage that you can hold on and keeps
others from reducing your profits?
The answer for most startups usually comes down to one or more of the
following:
1. Your product/technology is hard to build so many would-be competitors
would stay away and those that try, will likely fail.
2. You have a different, more effective way to distribute the product and can
reach customers more efficiently than others. This expertise and know-how is
hard to replicate.
3. Your costs of supporting and delighting customers are lower because we
have some operational advantage that is going to be hard for others to
reproduce.
SEO As Competitive Advantage?
Lets look further at #2. Lets say that you've figured out some magical way
to reach customers really cheaply for some product offering (we'll say "retail
price optimization software"). By "cheaply", I mean that although your
conversion rate to leads is very low, the value per lead is so high that you'd
happily pay the $12/click it is costing you on Google AdWords. You're making
profits on those clicks. You'd do this every day of the week (and in fact you
do). It's your primary source of great leads. [Side note: People just don't
seem to be coming to your trade-show booth as often as they used to, but that's
a whole different story...]
Life is good, for a little while. Then one day there's some new scrappy
little startup that also has a "retail price optimization software" product
(which for fun, we'll say is much inferior to yours). The product is
so bad that CTOs and CFOs to whom it is demonstrated are known to run laughing
from the room. But, the startup has some venture funding and has decided to use
it on PPC because the director of marketing just discovered Google AdWords.
They don't know a darned thing about bid optimization. They figure "hey, we
want more customers, we'll bid for the top spot! $15/click doesn't sound that
high...". And that's where the fun begins.
In situations like this, a new entrant can drive up the average price of a
click pretty effectively -- without a lot of time, or for that matter, talent.
What concerns me about this is that this increase in your costs per
lead has nothing to do with the quality of the competitor or their product. You
wake up one day, and your cost of acquiring a customer goes up -- and nothing
else has really changed. The advantage that you had built figuring out the
right keywords and is greatly reduced and your profits are driven downward.
Contrast this to an investment in SEO (which is, I will agree, is much
harder). You do all the things that people do to increase their organic
rankings for keywords that are relevant. You author great, compelling content
that is of real value to your target customers. You get inbound links. You
start to show-up on high-quality websites in your industry. Your rankings move
steadily up (as does your traffic and leads generated through search). This
takes time, and your initial cost per lead may be higher (even though
the clicks themselves are free). But, I'd argue that this investment yields a
much more sustainable advantage than PPC. Now, if that scrappy young startup
comes along and wants to compete, they can't do it on the price per click
alone. It's going to take them time to figure things out. It's hard.
It takes real work. People are lazy. Even if they are brilliant and work hard
at it, it's unlikely to change overnight. If you're tracking your inbound
marketing data, you'll know when they hit the top 100 rankings for your
keywords. You'll see them moving up the rankings. You'll have some time to do
something about it.
Summary: Once you put in all the brilliant hard work to get
leads and customers via SEO, it's much harder for others to take that advantage
away. And, even if they do, you're much less likely to be completely blind-sided by
it, as you would be with PPC.
Don't get me wrong. I have nothing against PPC. For many businesses, it's a
great way to get profitable traffic through the search engines. I just think
that over the longer-term, an investment in SEO will likely yield better results
and more sustainable competitive advantage.
What are your thoughts? Has SEO or PPC worked better for you? Have you seen
a rise in your average CPC (cost-per-click)?