Why you need to use CAC for SEO
Any marketing spend targeted at acquisition needs to have a baseline estimate of its value.
This week’s newsletter is sponsored by North Star Inbound and AthenaHQ
I attended Google Search Live in Zurich this week and will be sharing thoughts from the event next week. Stay tuned to this newsletter and my LinkedIn.
This post is a follow-on from last week’s post on annual planning. If you haven’t read that, do so.
Any marketing spend targeted at acquisition needs to have a baseline estimate of its value. Spending a million dollars “just because” is not a goal. You might spend a million dollars, but it comes with an assumption of performance. When it comes to digital marketing, this gets far easier because there are many more knowns, so the cost of acquisition is a standard metric.
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For many reasons, including the fact that SEO teams don’t like to justify spend (I say that with all the love possible), using a metric like CAC (customer acquisition cost) isn't as common in SEO, but it should be.
CAC isn’t that hard for SEO
Figuring out the customer acquisition cost for SEO seems impossible since it is nothing like paid ads, where you can connect every dollar spent to a specific conversion.
Many SEO costs are all over the place: Between content, design, engineering, employees, PR, and even employee perks. On top of that, unlike other marketing channels, there can be a significant time lag before ROI is recognized. Converting customers is a critical part of the CAC calculation, as without that, this is just money spent. You can obfuscate this as much as possible, but eventually the CFO might decide that SEO is a cost center rather than a revenue one. This is not good for SEO careers.
CAC is a necessity
Therefore, I think it is incredibly valuable to have a CAC for SEO even if it’s not as precise as we might wish. Even better for SEO, once you have a CAC, this cost will naturally decline as the SEO investment spreads across more acquired customers. This is an important feature to understand and will hopefully motivate you to go through the motions of developing a CAC.
Paid CAC is always fixed, with only beneficial fluctuations as conversion rates improve and overall costs go down. With paid, if you spend $1 per click on a Google ad, and on average it takes 100 clicks to convert. This would mean your CAC is $100. If you spent another $100 and had the same performance, the subsequent conversion would still cost you $100.
SEO has far better economics. With SEO, you might spend $100k on all of your SEO efforts, which drove 500 conversions in a year. This would mean each conversion has a CAC of $200. In a straight comparison, this is twice as expensive as paid marketing. But the magic happens in the second year. If in year two of your SEO efforts, you didn’t spend any money at all, and still got the same 500 conversions, the CAC would now be equal to the paid CAC. In year 3, if you again received the same conversions, the CAC would decline to $66.67, 30% better than paid channels.
This is how SEO CAC works when you do SEO effectively. Your SEO spend declines while conversions continue to accrue, lowering the overall SEO CAC.
Compounding growth
The math gets even more interesting when you factor in growth. In reality, you’re probably not going to get exactly 500 conversions in year two and year three. If you built a good product and have a brand, you’ll likely see conversion growth even without additional investment. Maybe you get 600 conversions in year two and 700 in year three. Now your CAC in year three is down to $55.55. This is the compounding effect that makes SEO so powerful as a long-term channel, and it’s precisely why having a clear CAC calculation matters. You need to be able to show this trajectory to justify the upfront investment.
The time lag issue deserves more attention because it’s probably the most significant psychological barrier to treating SEO like other acquisition channels. When you spend money on a Google ad, you see results within hours. When you invest in an SEO product that takes months to build, it might not drive any conversions for a long time. This creates a weird accounting problem where you’re spending money in Q1 but seeing the results in Q4, which makes quarterly budget reviews awkward.
The other piece that makes SEO CAC calculations tricky is attribution. With paid, attribution is straightforward because the click path is clean. Someone searches, clicks your ad, converts. With SEO, the journey is messier. Someone might discover your brand through a blog post, come back directly a week later, and then convert after clicking an email link. Does that count as an SEO conversion? Different attribution models will give you different answers, and most companies do not have the sophistication required to do this analysis.
Model with first-touch
For CAC purposes, I’d argue you should use first-touch attribution for SEO. If someone’s first interaction with your brand came through organic search, that conversion should count toward your SEO CAC regardless of how they eventually converted. This might seem generous, but it’s actually conservative compared to how many companies handle paid attribution. Last-click attribution is still common in paid, so paid often gets credit for conversions initiated by other channels. If paid receives the last click, SEO should at least get the first click.
Channel comparisons for CAC
On the surface, the math is dead simple. Take your total SEO spend, divide it by the new customers you get, and that is your CAC. But that formula falls apart the second you look closer. What do you actually include in “SEO spend”?
In the opening of this post, I suggested that the ambiguity of what is included in a CAC calculation makes this whole process complicated, but that’s only if you are striving to make it difficult. There are already great models for what to include and what not to include: look at the other channels you are competing against for budget resources. You might notice that your paid colleagues aren’t going out of their way to include their own salaries, tools, and employee perks in their CAC.
You can be sure that if this became the trend, the world’s largest advertising networks would produce white papers about why this is a bad idea, since these ad tools wouldn’t be able to optimize for a CAC they don’t know. If the paid, brand, and other marketing teams are not going out of their way to grab every associated cost to shove it into their CAC calculation, there’s no reason for SEO not to do the same.
Using these other teams as our model, we do exactly as they do. You want to find all direct investments in the SEO channel and apply them as costs in a spreadsheet. (Paid members can download this spreadsheet here.)
How to calculate costs
For SEO, direct costs typically include content creation (whether you’re paying writers, videographers, or designers), link-building campaigns, technical audits by external consultants, and SEO tools like Ahrefs or SEMrush. If you’re paying someone specifically to do SEO work, whether they’re a contractor or an agency, that’s a direct cost. If you’re paying for content that exists solely for SEO, that’s a direct cost.
Once you’ve identified your direct costs and settled on an attribution model, you can start calculating your actual CAC. The formula is straightforward, but the implications are massive. In month one, your CAC will look terrible. You’ll have spent money on content and tools, but driven zero conversions. In month three, you might have a few conversions, but your CAC will still be absurdly high. By month nine, things start to look reasonable. By month twelve, you’re probably competitive with paid. By month eighteen, you’re winning.
CAC will make you look great
This trajectory from ugly duckling to shining example is why I think every SEO team should track CAC monthly and present it in a cumulative chart. Show the whole curve. Let people see that yes, the first few months look expensive, but the economics get better and better over time. This is the story that gets you continued budget allocation, because it shows that SEO isn’t just a cost, it’s an investment that pays dividends.
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