Inbound Marketing Strategy: Why SEO Is Better Than PPC

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)?