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

Source & Written by Andy Hagans