• Causal Engines

Power Laws and Domain Authority: Why non-linearity drives outcomes

Humans are very good at understanding normal distributions. When it comes to height, weight or even IQ, whenever we take a small step in either direction on a percentile scale we expect a reasonable size change. For instance, the difference between the 60th and 65th percentile of male height is only half an inch.

These reasonable changes across the distribution make it easy for us to misunderstand distributions with much more abnormal behavior. Oftentimes, these non-normal distributions fail to be as neat or as intuitive as weight, something Nassim Nicholas Taleb, author of “The Black Swan: The Impact of the Highly Improbable” noted with a brief thought experiment: take the net worths of one thousand people in a stadium, which is likely around a few million dollars. If you add the wealthiest person in the world - Jeff Bezos with a net worth of 184 billion dollars - suddenly one man accounts for more than 99.99% of the wealth in that stadium.

If we make the mistake of applying our intuitive understanding of normal distributions, we will fail to understand how and why these massive differences appear - which also appear clearly when we examine domain authority, the relevance of a website or software in a specific industry.

With the rise of Google as an inbound channel, now potential customers have a complete universe of products to choose from. Before customers may have purchased more based on word of mouth or distributed materials, limiting the products they considered.

That means SaaS companies are faced with an intensely competitive internet and a wealth of companies fighting for user attention, making the difference between the 1st and 3rd search result absolutely devastating, especially when a user’s focus rapidly dwindles as they scan down search results. Being at the top - or bottom - of search results is often a self-fulfilling prophecy.

The search results for car insurance, for instance, exemplify the importance of your firm's position in search results. Climbing the search page will attract more customers, news, and general attention that build revenue and awareness for the product. In the inverse, the opposite happens just as quickly.

Fading domain authority exacerbates falling user count and can rapidly push a product out of the spotlight.

Investing in SEO and being conscious of your domain authority are vital first steps to both harnessing the immense potential of non-linear growth and protecting yourself from its dangerous risks.

We would like to thank Nicholas Tassim Taleb for their inspiration.

This article was a collaboration between Archit Bhise, Alex Li, and Grant Sobczak.