The Economics of SEO: Why SEO Belongs in Your Marketing Investment Portfolio

Law of diminishing returns

In economics, diminishing returns is the decrease in the marginal output of a production process as the amount of a single factor of production is incrementally increased, while the amounts of all other factors of production stay constant.

The Multiplier effect of SEO

In economics, a multiplier refers to an economic factor that, when increased or changed, causes increases or changes in many other related economic variables. For example, the invention of the smartphone can boost productivity and make it possible to create new innovations. In Africa, smartphone means a boost in exchanging money. So, the economic value lies not only in selling smartphones and smartphone producers.

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  • When all the questions of your users get answered on the website, you will rank better in SEO. But you also will have a really helpful website for your future customer.
  • When your pagespeed improves, you gain SEO positions. But in the meantime, your user may convert more.
  • When the navigation is structured and clear, Google understands your website better and the users do too.
  • Separated specific and optimized SEO landing pages can be used for search advertising campaigns. Your quality score may improve

Net present value and the Long-term advantage

Net present value (NPV) is a method used to determine the current value of all future cash flows generated by a project, including the initial capital investment. It is widely used in capital budgeting to establish which projects are likely to turn the greatest profit.

Risk diversification

Risk diversification is the process of allocating capital in a way that reduces the exposure to any one particular asset or risk.

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SEO Scale matters

Economies of scale occur when more units of a good or service can be produced on a larger scale with (on average) fewer input costs.

The innovation advantage

In the Solow model of economic growth, innovation is the key for sustained growth. Also, for businesses, investments in innovation tend to be more profitable than other investments (capital, labor), e.g. according to this study: https://www.nber.org/papers/w1562 2.

Conclusion: economics prove SEO is great

A diversified portfolio of marketing investment should include SEO as a marketing channel. Investing in SEO offers advantages in reducing risk, is long-term oriented, and even delivers multiplier effects which make other campaigns more effective.

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