What Competitive Economics Can Teach Us About Ranking in Search
While the algorithms and ranking factors behind search engines appear to be very technical, the actual end-userexperience (i.e., the search result) is more familiar. Search results function in a similar fashion to markets; scarcity, competition, incentives, etc., affect their behavior.
When you view SEO from an economic perspective, your understanding of some of the more perplexing realities of the search engine landscape begins to make sense; why such a small number of sites consistently rule search engines; why putting in effort does not ensure results; why small advantages accumulate over time. Competitive economics provides an invaluable framework to help put in perspective how rankings are achieved, and the reasons why they are difficult to displace.
Search Results as Competitive Markets
In economics, a market exists when small amounts of resources are allocated among competing users of that resource. Search results fit this definition perfectly. On page one of a search engine results page there are only ten organic positions available, and often there are fewer than that when factoring in the ads, maps and rich snippets that appear above the organic results.
There is high demand and every business wants their search results to be seen. There is no variable supply; therefore, there exists an imbalance that leads to competition.
Like traditional markets, search results will tend to concentrate. A few percent of companies earn the majority of clicks (i.e., look at a winner takes most market). The companies that have the first advantage based on their domain name and website ranking will be able to build an ever-growing number of inbound links, mentions and engagement which in turn provide them with a major advantage in the long run.
This isn’t by accident, but instead is built into the structure of the new marketplace.
Barriers to Entry in SEO
In economics, barriers to entry are what make it hard for new companies to compete with the current players in the market, just as there are barriers to entry for SEO.
Many of those barriers to entry can be found in the domain authority of a website. Age, link profiles, brand recognition, content depth, and historical performance all make it very costly to enter into an already established marketplace. Even if an individual has produced high-quality content on their website, they will still likely struggle to rank due to the fact that there are so many established sites with enough trust that they've received a lot of trust signals already.
This provides an explanation for why you may struggle to get your content ranked. While two articles could be the same in terms of quality, they could be experiencing very different levels of success, and the difference in performance really comes down to the accumulated advantage that the incumbent site has over the newcomer.
By understanding this concept, you can expect to have a different perspective on how long it will take for you to experience measurable results from your website. In highly competitive niches, SEO is not a sprint; instead, it takes time, money and accumulative growth.
Supply, Demand, and Keyword Value
Keywords are an example of economic goods; there are some whose supply greatly exceeds demand, thus creating a low level of value but very little profit opportunity. Then there are those that have limited supply (or much lower supply), leading to a high level of demand and competition for them.
The reason that this happens is because of the amount of payback you receive for spending money on things associated with competing for high-intent keywords. i.e., you have to pay more for many things associated with high-intent keywords – more content, more links, more optimization, and essentially more time, which increases the cost of ranking for high-intent keywords.
On the other hand, lower-competition keywords are generally considered to be an inefficient market because there are typically fewer participants in the competition for them, thus creating more potential opportunity.
Smart SEO strategies often mirror smart market entry strategies by identifying new market niches and long-tail queries (or niche-related problems or specific cases) that have low search volume compared to overall relevancy and have much higher potential for success over time than higher volume searches.
Over time, small wins generate enough authority to leverage into opportunities to rank for more competitive terms in the future.
Incentives and Algorithm Behavior
By the nature of their operation, search engines are not objective participants; they also serve as creators of their respective markets.
Specifically, Google creates the framework for competition by establishing the ground rules. The major driving force of the company is to provide the most valuable results while also encouraging visitors to remain on the platform. Pages that achieve these goals will be rewarded through the search engine ranking process.
Consequently, surface level optimisation (i.e., only making minor adjustments) is not able to compete with the effectiveness of other strategies/techniques (i.e., making more substantial changes). Even if an optimisation technique appears to provide a positive benefit, over time Google will address any exploitation of holes in Google’s algorithms. Therefore, judiciously made changes often lead to longer-lasting success as they represent true parallels to the user's intent and ultimate usefulness.
Google Search Central has repeatedly affirmed that systems are designed to incentivize content creation by humans (i.e., consumers) rather than by algorithms (i.e., producers). The terminology used by both organisations speaks to the importance of having regulatory oversight. That is, regulation will be effective if incentive structures incentivize productive behaviours.
Once SEO is aligned with search engine incentive structures, it becomes more durable in nature.
Strategic Differentiation in Crowded SERPs
In competitive markets, businesses are forced into competing strictly on price. The same concept applies to Search Engine Optimization (SEO).
If there are ten pages of similar content that are oriented towards the exact same keyword, the algorithm and retrieval process have very little basis to create different placements among the ten. The moment that one of those pages creates some degree of differentiation, that stalemate can be resolved.
Differentiation can take place in many ways. More in-depth thought or analysis (or both). Enhanced structure. More original or unique data. More robust or compelling examples. More easily understood explanations. Enhanced overall user experience. Page and site performance improvements. A greater degree of alignment with searcher intent.
At some point during any serious discussion regarding a competitive strategy, the concept of SEO for competitive markets becomes a vital part of that discussion. Whether or not an organization excels at a major competitive distinction will depend on how far it can differentiate itself from its competition.
Differentiation must be more than just a visual difference. Differentiation needs to be significant enough to create a substantial impact on how a user interacts with the page. If an organization has introduced real differentiation, it is likely that the result will be an increase in other online metrics such as engagement signals (e.g., backlinks) and/or mentions.
The Role of Information Asymmetry
Information asymmetry is an important economic principle that refers to when an individual or group has more or better information than another. There are examples of this in SEO where some publishers are better able to identify and leverage user intent, search patterns, and identify gaps in their content than their competitors. This gives them the opportunity to create pages that address the user queries more completely.
In all of this, the importance of research cannot be emphasized enough. Keyword tools are useful, but they are just a starting point for the intelligence you should use to create your content. Competitive analysis, SERP analysis, and audience research are great ways to uncover information that others may not be aware of.
If you are able to reduce the uncertainty for the user more quickly than the other pages competing for the same position on the SERP, you will have an advantage over them. And over time that advantage will compound.
Long-Term Investment and Compounding Returns
Unlike an advertising spend, SEO acts more like an infrastructure investment. With SEO, the results compound over time, and the losses are also long-lasting. Compounding economic models work the same way here. A page that ranks well on Google today will attract links to the page, which will help the page rank more easily over time. Authority builds on itself, and trust builds on itself.
This is why mistakes such as thin content, poor architecture, or manipulative tactics can incur “technical debt.” It will take time and effort to recover from those mistakes.
In an economic sense, SEO rewards patience, consistency, and reinvestment. Short-term thinking will not work in competitive environments; it typically fails when competing against organisations with longer-term plans.
Market Shocks and Algorithm Updates
These turbulent times are not static. External shocks are what cause the underlying competitive dynamics to change. The same goes for SEO; the algorithm updates basically have the same effect on search engines.
Through updates, search engines can lower or raise the barriers to entry, change the distribution of visibility (ranking factors), and completely invalidate the strategies of some websites overnight.
As in traditional markets, however, websites that have strong underlying fundamentals typically do better at surviving external shocks. Websites with strong content, real users and a diverse source of traffic will be more robust/ resilient.
The economic model is not negated by volatility; it is actually reinforced. Risk management is very important.
Final Thoughts
Most think of SEO as "technical" in nature, while actually, SEO is established as an economic system of competition.
With scarcity comes limited opportunity. With incentives comes influence on behavior. Barriers protect existing participants. Differentiation creates an edge. Compounding rewards patience.
When you begin to look at rankings not as puzzles, but as markets, you will better define your strategy; it's not easier, just clearer!
