SEO vs Paid, it depends on the assumptions

Everyone talks about SEO having excellent ROI compared to paid channels, but they rarely map out their actual assumptions about timing, investment, and returns. When you put real numbers down,

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Everyone talks about SEO's excellent ROI compared to paid channels, but they rarely quantify their timing, investment, and returns assumptions. When you put real numbers down, the picture becomes much more interesting.

Recently, I shared on Linkedin that I use a basic Google sheet as a forcing function to map out SEO assumptions and then see how they compared when the same dollars were used in paid marketing. Since this was just a glorified spreadsheet, I sought a better solution to share and demonstrate how it works.

Calculator tool

Last week, I caught up with Mariam Hakobyan, the founder and CEO of Softr, a company in which I had angel invested. She shared that with their new capabilities of Softr (read about them here), while not an obvious use case, I could build a calculator on their flexible platform. There are still some kinks to work out with how the graph matches the data, but it’s good enough for anyone to start playing with.

It is still a work in progress, so please reply to this email to be added to a waiting list for when the full version is ready for you to copy and modify.

While the graph is helpful, I think the most essential part of this tool is laying out costs, assumptions, and the decisions companies are forced to make.

SEO isn’t free

Let's say you're a Series A startup selling HR software. You're debating whether to invest heavily in SEO or pour that money into paid channels. The conventional wisdom is that SEO is "free traffic" while paid is expensive. But this completely misses the reality of how these channels work.

With paid, you know exactly what you're getting (as long as you set it up correctly). Spend $10,000 on Google/Meta this month, generate 500 leads, and convert 50 into customers. The ROI is immediate and measurable. The downside is that you are not investing; the leads stop coming when you stop spending. It's like renting traffic instead of owning it.

SEO is the opposite. You might spend $20,000 monthly on people, content, and PR and see virtually no return for the first 6-12 months. Most companies get frustrated and give up at this point. But if you stick with it and execute well, that content could generate leads for years. It's like buying a house instead of renting, painful upfront but potentially much better long-term economics.

The right channel depends on assumptions and expectations.

Choose wisely

Last year I met a late-stage SaaS company that perfectly illustrates this. They had a new $500,000 to invest in marketing. Their paid channels worked well, getting a 3x return on ad spend within 30 days. SEO looked promising, too, their competitors were getting massive organic traffic. But when we mapped out the assumptions, something else emerged.

The costs for each one of the content assets plus the agency they expected to pay for SEO strategy were fixed, but the returns from that investment were less concrete. When I asked them to put some rigor behind their assumptions, they were mere guesses and wishes.

The likelihood of getting the same leads as paid marketing from each SEO content asset was slim, and they knew it. Instead, they invested in paid traffic and earned the assumed outcomes.

Gambling on SEO

Taking a leap of faith in marketing isn’t necessarily bad, but a startup under a time and revenue crunch might find a better time for that gamble.

That same money in paid channels would generate predictable returns right away, and that knowledge is power.

This is where my calculator comes in handy. It forces you to be explicit about your assumptions: How much will you need to spend on SEO each month? How long will it take to see meaningful traffic? What's your expected conversion rate once you get that traffic? How long will the content generate leads? See this post on TAM for more details on that input.

For paid channels: What's your cost per click? What's your conversion rate? How much can you scale before costs increase? What's your customer acquisition cost (CAC)?

When you put real numbers against these questions, you often realize your SEO assumptions are too optimistic. Companies assume they can rank for competitive terms in 3-4 months or create competitive content with a $5,000 monthly budget. Those are OK assumptions if ranking and published pages are the only KPIs, but if revenue is expected, the assumptions must include that, too.

Copying the competition

Another way that this calculator is useful is when companies aim to compete against long-established competitors. For example, a company entering the tax space wants to rival TurboTax’s content or a travel startup that wants to replicate TripAdvisor.

Putting down the costs and assumptions might make them realize that creating hundreds or thousands of pages of content will take years and significant sums of money. This is usually when a discussion on Product-Led SEO that uses some programmatic elements becomes most appealing.

When I convince companies to hold off on an SEO investment, I don’t suggest they ignore SEO. Instead, I suggest they focus their limited resources on bottom-funnel SEO (like ranking for their brand terms) until they have the resources to compete appropriately in SEO. This is just being realistic about timing and requirements.

Timing matters

The calculator also reveals something interesting about mixed strategies. Sometimes, the best approach is to use paid channels to generate immediate revenue while slowly building your SEO foundation. The paid revenue can help fund the longer-term SEO investment. But this only works if you're explicit about the timeline and resist the urge to expect too much from SEO too quickly.

I've seen companies blow through their entire marketing budget trying to do both channels halfway. They spend enough on paid to get mediocre results and enough on SEO to create content that never works. They would have been better off going all-in on one channel and doing it right.

What's particularly interesting is how this calculation changes based on your business model. If you're selling a high-ticket B2B product with long sales cycles, the immediate response from paid channels might be less valuable than slowly building authority through SEO. But if you're selling a consumer product with tight margins, waiting 18 months for SEO to kick in might not be feasible.

Make the best decision for you

The main thing is to be honest about your assumptions and constraints. SEO isn't inherently better or worse than paid channels; it's about choosing the right strategy for your situation. Map out your actual numbers, be conservative with your assumptions, and make sure you have the runway to implement your chosen strategy.

Remember, it's not just about which channel has the better theoretical ROI. It's about which channel aligns with your business realities right NOW.

Sometimes, the best SEO strategy is not to do SEO yet.

(Play around with the calculator, but be warned: It is a beta. Please reply to be added to the email list of people I can directly message when it is live or if you have build suggestions.)

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