I see everywhere on the internet how to optimize loading speed of a website but no one says why it's important for SEO.
Inevitably, there are reasons why Google has decided to take this factor into account when ranking websites.
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Google wants to provide its user base with the best experience possible when browsing the web - this is what retains their customers. A poor page load speed can have a serious effect on user experience, that is arguably the main reason Google sometimes ranks these sites less favorably.
It is also an indication that the site isn't perhaps maintained to a high standard therefore reducing the quality of that site.
Google will penalize sites that are very slow (greater than 7-10 seconds for the page to become usable). They do this because they state that users are usually not willing to wait that long when they click and usually return to the serps. Google wants to make their users happy.
In addition to the direct penalties applied by Google, there are indirect consequences of having a site that takes more than 3 seconds to become usable. At about 3 seconds users start turning back to the serps to look for something else. Google uses this "bounce-back rate" as a major factor in the algorithm. A site with a high bounce-back rate will fall dramatically for the particular query for which it was ranking. A slow site will begin to decline in rankings due to this effect.
Again, three seconds seems to be the magic number. Webmasters that improve their site to this threshold often see ranking gains. Improving speed below three seconds may further improve user experience and may lead to higher conversions or better interaction, but it does not appear to improve rankings.
First, I would like to state that websites and blog should be created keeping in mind the target audience rather than search engine ranking, which even Matt Cutts will agree. Site loading speed has only a small part in Google’s ranking algorithm, but the fact remains that websites that are fast have better ranking in the search engine. Why? To answer your question let me put it this way that a fast website is popular with the audience and second, Googlebots are able to index and crawl the WebPages of a fast site much quickly.
The answer given by Jack Lockyer is absolutely correct. See Google is the number one search engine in the world with about 80% of all searches performed in. So if a user is looking for some info on internet via Google. He will be pleasured when he gets answer immediately and as well as have some positive thoughts on the website from where he got his answer.
For example: I consider you searching for some information on internet using Google. And you simply opened ten tabs of pages that appeared in 1st page of Google. Out of these websites, which website will you go first. The one which loads quick or the one which loads very slow ?
In my opinion, you will definitely go to the website which loads faster. Is it right?
So, Google wants to show the website which loads fast to increase user experience. So that users will always use Google for searching information.
Yes This is why Loading speed is considered in ranking web pages.