Eli Schwartz

In the world of investing whether at an exclusive hedge fund or a basic retirement plan, the effect of compounding growth is a bigger driver of returns than lucky timing or discovering massively undervalued opportunities. Explained simply, compounding is the idea of earning returns – even small ones – which are then added to the principle. Compounding is generating earnings from earnings.

The longer an investment stays in the market, the more it can earn from the compounding effects of growth. Even if there are times of negative growth, the aggregate periods of positive growth can easily  overcome the slower or negative growth periods.

The unanimous opinion of all financial advisors is that the best financial decision anyone can ever make is to start investing as early as possible even if is just small amounts. Those small amounts will add up to massive sums if they have the opportunity to compound year after year. Putting aside timing and picking winner which are both impossible without a crystal ball, just diving in is the best approach.

To put this into real numbers a single $10k investment made into the stock market and then compounded for 40 years will be worth $174k assuming an average rate of return of 10%!

Compounding marketing

I believe the same holds true in marketing and especially SEO. While there are always going to be scenarios which unlock hockey stick growth, these are going to be rare and difficult to uncover. There is always a lot of attention paid to viral campaigns or growth hacks that have reaped dividends for years.

Who can ever forget the Old Spice videos which responded to celebrities in real time or Airbnb’s cross posting on Craigslist? In truth, while there are dozens of candidates for the greatest marketing campaigns of the Internet age, there are millions that have just been duds.

Real user growth happens from doing the unsexy acts of connecting with customers and telling the story of how the products improve the lives of its users. Each customer that is persuaded to buy will depending on the business buy more/subscribe/pay higher year after year. In addition, these customers will tell others if they have a positive experience.

To put this into more specific numbers, there could be opportunities to grow 100% year over year, but more than likely there are not very many of them. And, especially for companies that have already plateaued in their demand these are even less likely. Growth will come from adding optimizations and improvements to an already growing user base.  A growth rate of 20% (in traffic, revenue, sales or whatever the key metric might be) will lead to a doubling of the base in less than four years!

Too often marketing leaders are in in search of the magic bullet that will drive a 100% growth in a single year and neglect the improvements that will just grow 20%. When they miss their 100% bet, they are still at the same base or maybe even lower.

Compounding SEO

SEO is the best place to see the effects of compounding within marketing. I have yet to see a graph of any website’s traffic that did not continue to edge up year after year UNLESS there had been a cataclysmic event like  site update or Google penalty. This steady growth happens even if no changes at all were made to the site for year – with a caveat of course that that site’s content is in an evergreen space. Obviously if it was timely, the demand for the content would become stale.

What this means is that as a site generates traffic from Google it continues to accrue the positive signs that will allow it to even more traffic as time goes on – the effect of compounding. Overtime the site will accumulate natural links, good user experiences that feed into search visibility and broader deeper indexing as Google’s AI improves. At the same time, it will also grow at a natural rate of more people using Google and the Internet – let’s call that the rate of inflation.

Neglecting compounding

Just like in investing where there are all too many people who sit on the sidelines of the market because they are waiting until they have enough money to invest or are looking for the right opportunity, the exact same happens in digital marketing and SEO. The people that don’t invest in SEO don’t disagree that SEO is a great place to generate users and customer; rather, they think the time is just not right, yet.

The best time to invest in SEO is six months before its needed, but that is impossible to know when that time is arrived. Again like investing, a little bit of effort now is better than no effort at all.

Admittedly, SEO does take a long time to build a solid base and while its growing it seems so slow. It is hard to justify efforts in SEO when maybe a paid marketing team is spending huge sums and returning amounts just as big. However, doing the right thing isn’t always fun. Without trying to start building out SEO, compounding can never begin.

Without compounding there will be no triple digit growth in a few years time. The best hope for anyone that ignores SEO is that their competitors ignore it too because like in the financial markets, its very hard to catch up to those that started earlier and smarter unless… you are just lucky.