Search and the Pareto Principle

by Jeff Quipp October 19th, 2007 

The Pareto Principle, also known as the 20/80 Rule, is an interesting phenonenum that has many implications for those practicing search and social media. The concept is losely defined as; for many events, 80% of the effects come from 20% of the causes. Its a truism so to speak, though its the rough concept that is important and not the absolute numbers. Some real life examples of this concept in action are:
a) in general, 80% of a hockey teams goals, will come from 20% of the players
b) often 80% of a company's revenues will come from 20% of its clients
c) 80% of a country's wealth will be held by 20% of the population
d) 80% of the postings on Spinn/Digg, etc. will be by 20% of the total number of posters
e) 80% of most tasks can be completed in 20% of the time

Pareto Principle Chart
Courtesy of ParetoStaffing.com

Where this concept gets more interesting, and has meaning for search marketers is what we can learn from it … for example;
a) 80% of a site's traffic, will come from 20% of the sources (actually, in our case, 80% of the traffic came from 6% of the sources last month … but again its the concept. Google's power tends to scew those numbers even more drastically).
b) 80% of search traffic will come from 20% of the keywords (in our case, 80% of the traffic came from 40% of the keywords in September) though this is highly dependant on the amount of content on the site for organic search, and the breadth of the campaign for paid search.
c) 20% of your efforts are responsible for 80% of a site's achievements.

Pareto Principle Chart 2
Courtesy of UNB.ca

The big learning here is not the absolute numbers obviously since they're not always spot on, but rather the fact that a large percentage of effects come from a small percentage of the causes. Accordingly, we as search marketers could be much more effective if we were merely able to focus our time on the 20% responsible for the 80% (sorry perfectionists) … and never permit ourselves to get sucked into the vaccuum of the remaining 80% of our time/effort that generates only 20% of the results.

So, how can we apply this Pareto Principle to search to make us stronger search marketers?

1) it helps us understand where to best spend our time, eg.:
a) Google, Yahoo, MSN, Ask control more than 90% of search engine searches (not including internet Yellow Pages which have large search volumes too).
b) 20% of your clients are responsible for 80% of company revenues (thus the whole concept of segmentation).
c) 20% of content is responsible for 80% of site traffic and/or links

2) it can also lead us astray if we don't truly understand our objectives, for eg. while 20% of keyword phrases will often be respsonsible for 80% of a site's traffic, a different and often semi-overlapping 20% of keywords will often generate 80% of conversions (think about the conversion rates of specific vs generic terms). At the same time, typically the more competitive the term, the more we require perfection, and the more we have to delve into the efforts which will consume 80% of our time, yet only generate a less than proportionate return (I believe the concept is called "Law of Diminishing Returns" in Economics).

3) At the end of the day, the Pareto Principle is a good conept to guide our actions, but it also gives us a defense for unreasonable or misguided client requests. Consider the following conversation, which we've all had many times:

    Mrs. Client – I want to rank #1 for the terms ___, _____ ____, and ___ ____!

    You – is it really important that you rank for those terms Mrs. Client, or do you really want the conversions that come with those rankings?

    Mrs. Client – If I had to choose, I'd take the conversions obviously.

    You – OK then. Let focus our activities on the 20% of the efforts that will generate 80% of your business online (good quality content, long tail terms, etc.) rather than visa versa. I believe its also called "getting you the biggest bang for your buck!"

There are also a large number of other interesting implications we can assume from this concept also … here are a few more:
1) 20% of your online friends will be responsible for 80% of your support (diggs, stumbles, etc.) … so make sure to treat them really really well.
2) 20% of commenters will be responsible for 80% of comments on your blog (again, treat them right).
3) 20% of your inbound links will be responsible for 80% of your link juice!
4) 20% of social media sites will drive 80% of traffic and/or links.
5) likely, 80% of your clients revenues will come from 20% of their products.

I'd be really interested in hearing more examples of the Pareto Principle in action in the SEM/SMM industry, so let me know your thoughts.

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6 Responses to “Search and the Pareto Principle”

  1. John Rasco says:

    Good thing to think about. For a marketer, the 20% of the job requirement spent on managing search is going to drive 80% of their online sales. Good leverage, ey?

  2. Dito says:

    i thought it was 90/10?

  3. Jeff Quipp says:

    @ Dito – 90/10 perhaps in some cases. Generally defined as 20/80 though (see http://en.wikipedia.org/wiki/Pareto_principle). Though, its the concept and not the absolute ratio that matters the most.