Navigator
Startup
Customer Acquisition

Paid Search vs. Organic Search: The Economics

Why organic search looks free but isn't—and how to decide when to invest in paid vs. organic.

• Navigator Team
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You’re sitting in a strategy meeting. Your team is debating: Should we invest more in SEO (organic search) or Google Ads (paid search)?

Someone says: “Organic is free. We should do that.”

Someone else says: “Organic takes 6 months. We need paid search for immediate results.”

Both are right. Both are wrong.

The question isn’t “should we do organic or paid.” It’s “what’s our timeline and what can we afford.”

The False Notion That Organic Is “Free”

Organic search is not free. It just doesn’t cost money in the same way.

Organic (SEO) costs:

  • Time to research and create content: 40 hours × $100/hour = $4,000
  • SEO specialist salary: $6,000/month
  • SEO tools (keyword research, site audits): $500/month
  • Link building and outreach: $2,000/month
  • Total: $8,500/month

What you get for $8,500/month in organic:

  • Maybe 50 monthly visitors from ranked keywords (after 6 months of work)
  • Maybe 2-3 conversions per month
  • CAC from organic: $8,500 / 2.5 = $3,400

Paid search costs:

  • Google Ads spend: $5,000/month
  • PPC specialist to optimize: $2,000/month
  • Tools and software: $300/month
  • Total: $7,300/month

What you get for $7,300/month in paid:

  • Immediately 100+ visitors per month (starting day 1)
  • Maybe 5-7 conversions per month (higher because you’re bidding on intent)
  • CAC from paid: $7,300 / 6 = $1,217

On first glance, paid search seems cheaper ($1,217 vs. $3,400 CAC).

But the organic number improves over time. The paid number requires constant spend.

The Time Value Difference

Organic timeline:

  • Month 1-3: Invest $25,500, get 0 conversions (0 conversions, $0 revenue)
  • Month 4-6: Invest $25,500, get 2 conversions/month (12 conversions, maybe $60k revenue)
  • Month 7-12: Invest $51,000, get 4 conversions/month (24 conversions, $120k revenue)
  • Year 2+: Maintain $102,000 investment, continue getting 4 conversions/month (48+ conversions, $240k+ revenue)

Upfront cost is high ($102k in year 1). But year 2 return is excellent ($240k revenue on $102k spend).

Paid search timeline:

  • Month 1: Invest $7,300, get 6 conversions ($30k revenue)
  • Month 2: Invest $7,300, get 6 conversions ($30k revenue)
  • Month 3: Invest $7,300, get 6 conversions ($30k revenue)
  • Year 1: Invest $87,600, get 72 conversions ($360k revenue)
  • Year 2: Invest $87,600, get 72 conversions ($360k revenue)

No upfront cost. Consistent return. But you’re paying forever.

The Long-Term Economics

Let’s say you have $100k to invest.

Scenario 1: All organic

  • Year 1: Spend $100k, revenue $60k (loss of $40k)
  • Year 2: Spend $100k, revenue $240k (profit of $140k)
  • Year 3: Spend $100k, revenue $240k (profit of $140k)
  • 3-year cumulative: Spend $300k, revenue $540k (profit of $240k)

Scenario 2: All paid search

  • Year 1: Spend $100k, revenue $360k (profit of $260k)
  • Year 2: Spend $100k, revenue $360k (profit of $260k)
  • Year 3: Spend $100k, revenue $360k (profit of $260k)
  • 3-year cumulative: Spend $300k, revenue $1.08M (profit of $780k)

Paid search wins if you measure 3-year profit.

But:

  • Organic wins if you measure year 5+ (organic compounds, paid doesn’t)
  • Paid search wins if you measure profit velocity (you need cash now)
  • Organic wins if you measure lifetime value (customers keep coming)

The Practical Decision Framework

Choose paid search if:

  • You need customers immediately (cash runway < 6 months)
  • Your product market fit isn’t proven yet (you might pivot before organic pays off)
  • You have enough cash to sustain it (you need $7-10k/month ongoing)
  • Your LTV is high enough to support the CAC ($1,200+)

Choose organic if:

  • You have 12+ months of runway (you can wait for results)
  • Your product-market fit is proven (you’re confident in the long term)
  • Your cash is constrained (you can’t afford paid for the long term)
  • You’re optimizing for long-term profitability

Choose both if:

  • You have the cash ($15k+/month)
  • You’re playing to win (you want to own your category)
  • Your LTV supports it
  • You want quick wins (paid) + long-term moat (organic)

Why Most Startups Get This Wrong

Mistake 1: Underestimating organic costs

Founders think: “SEO is free, we should just do it.”

Then they hire a freelancer for $500/month who does nothing. Or they do it themselves and spend 20 hours/week that could have generated $100k in revenue.

Organic requires commitment: $5-10k/month to do properly.

Mistake 2: Overestimating organic speed

“We’ll invest in organic and it’ll pay off in 3 months.”

Realistically: 6-12 months before you see meaningful traffic.

If your runway is 6 months, organic won’t work.

Mistake 3: Underestimating paid search volume

“Paid search is too expensive. CAC is $1,500.”

But maybe your LTV is $5,000. Then 3.3x CAC is healthy. You can scale it.

Don’t avoid paid search because of the absolute cost. Look at the ratio.

Mistake 4: Not accounting for content shelf life

Organic content keeps working. A blog post that ranks drives traffic for 5+ years.

Paid search stops working the moment you stop spending.

If you’re going to be in business for 5+ years, organic is the better long-term play.

The Hybrid Approach

The smart approach is not “organic or paid,” but “organic and paid with different roles.”

Paid search:

  • Role: Capture high-intent customers (they’re searching for your solution now)
  • Volume: Lower (only people searching)
  • Speed: Immediate
  • Cost: Higher CAC ($1,000-2,000) but only on intent traffic

Organic search:

  • Role: Build awareness and capture volume (you show up in searches over time)
  • Volume: Higher (all searches eventually)
  • Speed: Slow (6-12 months)
  • Cost: Lower CAC ($500-1,000 after you rank) but high upfront

Optimal strategy:

  • Year 1: Use paid search to acquire high-intent customers and fund growth
  • Simultaneously: Invest in organic (content, SEO) with 5-10% of budget
  • Year 2: Organic starts paying off. Reduce paid search spend, increase organic investment
  • Year 3+: Organic carries most of the volume. Paid search is supplemental

This gives you:

  • Quick wins (paid search, year 1)
  • Long-term moat (organic, years 2+)
  • Compounding returns (organic grows while paid plateaus)

The Blended CAC

When you run both, calculate blended CAC:

Total customers from both channels / Total spend on both channels

Example:

  • Paid search: 50 customers, $10,000 spend (CAC: $200 per customer)
  • Organic: 10 customers, $5,000 spend (CAC: $500 per customer)
  • Blended: 60 customers, $15,000 spend (CAC: $250 per customer)

This helps you see the portfolio effect. Even though organic has a higher individual CAC, blending it with paid search lowers your overall CAC.

The Takeaway

Organic search isn’t free. Paid search isn’t expensive forever.

The choice depends on your timeline and cash position.

If you need customers now, start with paid search. If you have time, invest in organic.

Ideally, do both: Use paid search for immediate ROI while building organic for long-term profitability.

We help you model out the economics of each channel and decide which mix makes sense for your stage and resources.