Why Google Should Love SEO ??: A SaaS Perspective

??No sensationalism here; true story, but first a bit of context.

Google has been a public company since August 19th, 2004. Since then, they've had a mandate to maximize shareholder returns and with that —there is no doubt— Google has eroded the value of SEO as more advertisers enter its ecosystem.

When Ads Used to Be Ads

Source: searchengineland.com

Today's ads are seamlessly blended into the rest of the SERP (search engine results page). This undoubtedly increased clickthrough rates for ads as there is now little distinction between paid and organic. Anyone who follows SEO has seen Google chip away at this over the years.

SERP Features

SERP features are anything that deviates from the classic "10 blue links." This includes elements like the knowledge graph, featured snippets, carousels, people also ask and other various features constantly being tested. See a comprehensive list here.

These features reduce clickthrough rate for the 10 blue organic links that fought so hard to get there. Google's battle with SEOs goes well beyond penalties, it's now a true turf war. Google wants to invade what was once yours, arguably to the detriment of its users, but that's another story for another post.

So Why Should Google Love SEO?

I'm going to focus on SaaS and also ecommerce because it's what I know best from my time at FreshBooks and also several other clients I work with. The principles still apply to any company that knows its target CPA (cost per acquisition).

SaaS and Ecom CMOs are held accountable to CAC (customer acquisition cost), but there's one very important thing that everyone (including Google) sometimes forgets to realize about this: these CMOs are held accountable to a blended CAC that is channel agnostic.

This means the CMO doesn't report on CAC for each channel whether it's SEO, paid search, paid social, programmatic or any other means to acquire customers. She is only accountable for a blended CAC that incorporates all channels.

It’s also worth noting that CAC is the sum total of all the costs associated with acquiring customers, including overhead costs and employee salaries.

LTV:CAC

All sizeable SaaS and ecommerce companies will give their CMO an LTV:CAC (lifetime value:customer acquisition cost) ratio target that's net profitable. This means that the company is willing to spend a certain percentage of its customer’s lifetime value to acquire a new customer. For example, if LTV:CAC is 3:1, a company's LTV is $300, they are willing to spend $100 to acquire a customer.

What does this mean?

Simply put: the wider the delta between LTV and CAC, the more profitable customer acquisition is; but as companies scale, this becomes more difficult to maintain. When you've run out of ways to increase LTV, maintaining a high LTV:CAC ratio means aggressively finding ways to reduce CAC and without low CAC channels like SEO, this becomes very difficult.

Conversely, if a company is unable to reduce CAC in a meaningful way (as is often the case when they're too dependant on paid channels), they must aggressively find ways to acquire higher LTV customers (or increase the LTV of your existing customers) to maintain a profitable LTV:CAC ratio.?

So What are You Getting at, Steve?

When a company finds themselves in the latter scenario, paid search is typically the fastest way to acquire high LTV customers, but how do you do that at a net profitable CAC? This is where SEO comes in to anchor high cost paid channels, thus bringing the blended CAC down and achieving net profitability.

No Steve, We Still Don't Get Your Point.

My point here is simple: when it works, SEO is by far and away going to be your lowest cost digital channel. Just compare the cost of an organic click to a paid one.?

If you're not investing in SEO that's performing, you're actually doing your other channels a disservice because you're not allowing them to compete more aggressively, especially in paid channels where the cost of clicks goes up every year, without fail.

The True Power of SEO

I've talked about ranking #1 for a 200,000 monthly search keyword and how that page drives the equivalent of $42,000 in search ads traffic per week.

Guess what? A keyword like that brings the blended CAC way down and, you guessed it, allows paid channels to keep pace with rising CPCs and even become more aggressive.

What makes it even more interesting is that if that low SEO CAC for some reason gets wiped out, all other channels suffer because the blended CAC now skyrockets. So Google, it’s really in your interest to let companies have their cake with SEO.

SEO Saves the Day?

It's important to adopt the nuanced view I've illustrated here. SEO is not a silver bullet (no channel is), but the impact that SEO can have on paid channels in this context is profound. In other words: SEO lifts all boats.?

Since you've made it this far, allow me to explain the rub. Finding the right channel managers is tricky. I'm part of a freelance team that has the experience to understand these nuances and knows how to work together to execute and achieve a target CAC that's inline with your net profitable LTV:CAC. If you’d like to learn about us, send me a message.

Thanks for reading and please share your thoughts in the comments.?

-Steve Toth

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