Warren Buffet’s Advice to SEOs (Or, Why Your Business Model Is Working Against You)

Ok, in case you didn’t figure it out yet, the post title is a tad bit baity–the world’s greatest investor didn’t specifically speak about SEO :-)

But then again, he did. My favorite Buffet quote of all time is a reminder that highly profitable industries can make average managers seem like geniuses, whereas industries with poor underlying economics can make even genius managers seem average (or worse).

“Managing your career is like investing–the degree of difficulty does not count. So you can save yourself money and pain by getting on the right train.”

OK, that’s pretty generic. But let’s get specific and apply it to SEO. Quick quiz: you are a 4 year SEO veteran, skilled in high-value-added tactics like link baiting, internal linking, conversion optimization, etc., and you have a wide, trusted network of professionals (designers, content writers, programmers) who can help you implement pretty much any idea you can think of and outline. Do you:

  1. Spend your time posting on forums
  2. Spend your time blogging
  3. Work for an SEO firm on salary
  4. Spend your time consulting
  5. Launch a site you own in a niche you’re passionate about
  6. Launch a site you own in a highly profitable niche

Here’s a hint: those options are listed in ascending order of long-term profitability ;-) The guys who do 1, 2 and 3 are the ones with the “names” and who we all love to hear speak at PubCon. The guy who does #6 might get ignored at PubCon, but on the other hand if he sticks with it for 36 months he’s paying cash for a Ferrari and a beach house.

One thing that isn’t always clear to n00bs who enter the industry the same way we all do–via blogs, forums, conferences–is that good SEOs aren’t necessarily good businesspeople. A lot of the most talented SEOs I know are tactical geniuses, but strategic idiots (and I include myself in that group–but hopefully I won’t in 2008).

I have created a lot of websites over the years, and put a ton of creativity and elbow grease into them. Boy, what I wouldn’t give to go back in time and tell my past self to go all-in in the most competitive (and high margin) industries I knew–mortgages, online dating, insurance, etc. Because even an average 2003-launched site in one of those industries (given some consistent TLC) is now pulling in six figures (if not seven), which is a lot more than I can say for most of my 2003-launched bullcrap!

Again, let me be specific (because boy do I hate generic advice)!

  • Running an SEO service firm is a model with poor underlying economics (very hard to scale while staying ethical and providing value)
  • Being an SEO consultant is a model with poor underlying economics (even with a high hourly rate, you will have a hard time billing more than 24 hours a day; your potential profits are capped)
  • Blogging fulltime is a model with poor underlying economics (yes, there are “lifestyle benefits”, which I clearly believe are important, but we’re talking business here people!)

Now, are there businesses making a ton of money doing the above? Sure there are. I would argue that they either got into their niches when the underlying economics were good (windfall profits, first mover advantage, etc), or that they are run by very talented managers who are managing to squeeze out above-average profits even as external factors chip away at their margins from many different angles. Just think, what if those same talented managers were in industries with good underlying economics (for instance, running specialty insurance lead-generation sites with premium domain names)!

The richest SEO whom I personally know is someone I guarantee you’ve never heard of–he doesn’t blog, he doesn’t speak at conferences, and he only rarely bothers posting at forums. He’s got a site in a competitive, profitable lead-gen niche, and he’s promoted it consistently over the past 4 years with boring, plain-jane SEO and link building tactics. Who knew? Being an average player in a highly profitable niche is, well, highly profitable.

So forget about being the best SEO–be a good CEO, instead. Bop on over to CJ, find a category with a lot of high-EPC offers, acquire a semi-premium or premium domain name, and get cracking… your 2010 self will thank you, I promise.

Update 2:00 PM: I forgot to credit Mr. Provost for the inspiration to this post: Why SEO Consulting Is a Terrible Business Model And You Are An Idiot For Doing It

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15 comments ↓

#1 Shane on 04.24.07 at 9:29 am

Why do you spend any of your time blogging in such a high-competition, low-revenue niche, then? I can think of several good reasons, but I knew it would be interesting to hear your own personal take on it instead of just speculating.

I’ve posted several times in the comments of consultants who have blogged about the downside of consulting, asking them why they keep doing it when, presumably, they could make much more if they focused on SEOing their own stuff. (I absolutely know it’s the case for at least one of them.)

I’ve never read a case for why your position doesn’t hold up, and it seems worlds more logical. Why put yourself through creating success for clients when you could be doing the same for yourself and not have any of the headaches of nightmare clients?

As nice as it would be to buy a Ferrari F430 as client bait, I’d rather just buy one because I had earned enough money to without having to deal with clients.

#2 admin on 04.24.07 at 9:37 am

Valid questions. To answer them:

1) Why I blog: I enjoy it :-) (I also only post a few times a month, so it’s not a huge opportunity cost for me)

2) Why I consult: To raise cash and pay the bills while I work on the long term “big projects”. I am highly doubtful that I will still do any consulting at all in six months’ time, for exactly the reasons you say.

#3 julien on 04.24.07 at 9:57 am

great post andy. seriously, being famous is overrated.

#4 rolove on 04.24.07 at 11:52 am

So is making a billion dollars while you sit in front of your computer working on one silly website. Consulting and “being famous” allows you to get outside, travel, and meet people who share similar interests. And don’t say money brings you the same thing.

#5 admin on 04.24.07 at 12:03 pm

Money doesn’t allow you to “get outside, travel, and meet people who share similar interests” ? I think a lot of the big domainers would disagree with that statement :-)

>So is making a billion dollars while you sit in front of your computer working on one silly website. [overrated]

Again, I think a lot of the big domainers would disagree with that statement. I would too. But then, I’m a capitalist, maybe you’re not ;-)

#6 scoreboard on 04.24.07 at 1:06 pm

First, let me just say that any blog I have to log into better be coming hard with free porn. I’m just saying…

Secondly…

“As nice as it would be to buy a Ferrari F430 as client bait, I’d rather just buy one because I had earned enough money to without having to deal with clients. ”

I think you missed the point, Shane. I wouldn’t plunk down the two fitty as an explicit biz dev move. I was just rationalizing the fears of that outlay of cash as, “Well, it will surely attract enough of the right conversations to turn into clients if I wanted to subsidize that addiction.”

I’m actually aiming at the Carrera GT now and my client list is whittled down to only a handful, so I’m trying to be more of a Hagans Life Winner to that end.

#7 AnalogToadJuice on 04.25.07 at 8:44 am

In our industry, there is alot of no namers that make 6 figures to millions discovering cutting edge “traffic generating” ideas, whether it’s seo, ppc, or “other”.

A good portion of them started by themselves when they where 16-18 having the time after school to nerdify there websites, test, re-test, change and repeat.

What it takes in this niche of the world is a little experience, a decent idea, a SOLID business plan, the will to execute PROPERLY, and ALOT OF BALLS.

Life gets in the way when your older….The time it takes to execute all that’s involved with launching a website (and the risks associated with failure) is too much to bear for ALOT of risk-adverse newbies, especially when the payoff doesn’t happen right away. I tend to think this screens out alot of older people as well.

What i’ve come to realize in this industry, is life WILL screen out people to only those who know exactly what there doing (like in any industry) and have the balls to go on there own. The risks are high, but the payoff is even HIGHER. Those who started young get an advantage, cause they understand the mechanics of what’s involved and have the benefits of experiencing FAILURE and learning from it.

However, the other side of the coin is market intelligence. Who better to KNOW what industries suck and what industries rock than SEO consultants? (and how to optimize for them). I’m sure there are alot of seo consultants who do it purely for the market experience AND business intelligence. They will gain an inherit understanding of the mechanics of lead gen vs. e-commerce, vs affiliate and the PROFIT MARGINS of niches.

After a few years, they KNOW who’s making the money, and HOW….then all you do is develop an interesting idea, a different take, and you got yourself a SOLID solo project niche to work on.

Both sides have advantages, but in the LONG, LONG term…i think the SEO consultant who decides to jump ship have a MASSIVE advantage over those who know corner a niche. It’s all about diversification.

t

#8 Shane on 04.25.07 at 9:04 am

Scoreboard: hope I didn’t come across as knocking your Client Bait post. I liked it so much, it was actually the post that got me using del.icio.us so that I knew I’d always be able to find it again. It’s easily one of my all-time favorites. If I ever go back to consulting, I’m going that route.

#9 nsusa on 04.25.07 at 12:25 pm

I like that post. Still gives me hope to advance from good (or average) to great. However - the (now authoritative) site from 2005 is due to make six-figures next year accordingly, but I think it won’t. ;) Can you give me a hint maybe?

Chris

#10 admin on 04.25.07 at 12:54 pm

> However - the (now authoritative) site from 2005 is due to make
> six-figures next year accordingly, but I think it won’t. ;)
> Can you give me a hint maybe?

Well everyone has a different workflow and talents, but for me, the answers would be:

1) Work harder (more hours)
2) Link bait (at least once a week; try out different things, tools, humor, awards, contests)
3) Explore new monetization methods (especially in lead gen); My favorite site sections are those where the ads ARE the content. (These also tend to be the most competitive niches–but if you really are an authority site, your overall domain weight should allow you to compete)

Also, are you reinvesting everything? Are you getting aggressive enough? Is it perhaps time to hire a fulltime (or halftime) content writer?

#11 slayerment on 04.30.07 at 1:52 pm

Awesome post, very, very true :).

#12 sparrow123 on 08.06.07 at 10:10 pm

Hi, I am totally new to internet marketing and am really enjoying your articles - so much to ponder. If you have the time, could you please explain what “CJ” and “EPC” mean in the sentence in which you wrote, “Bop on over to CJ, find a category with a lot of high-EPC offers…”. Thanks:)

#13 jerret on 11.04.07 at 7:44 am

Any industry in which you trade time for money is in the same boat. This includes doctors, lawyers, accountants, and about 100% of all other service providers.

I don’t think Buffet was necessarily referring to every service provider in existence.

I think he was referring to sites like FaceBook; millions of visitors (genius) with no clue how to make money in the long term (bad management).

Thanks!

#14 Palmer Web Marketing on 01.12.08 at 3:58 pm

Good point about consulting being a poor economic model. The only way to earn more is raise your rate or work more hours. You can only raise your rate so much and you can only work so much…

I think Aaron Wall has a good thing going with his SEO Book model. Informational products can be packed with value, and provide near unlimited growth potential.

#15 Jim-Jim on 02.19.08 at 1:31 pm

Very interesting post!

“Bop on over to CJ, find a category with a lot of high-EPC offers…”

Man, I might be ugly-stupid, but can you fill me in on what you mean by “CJ” and “high-EPC offers”?

Thanks!