Connecting PPC vs SEO Spending

Rand Fishkin asked some important questions about why paid search gets most of the ad dollars allocated to it. Reading the comments is even more interesting to me because they’re mainly from the viewpoint of SEOs rather than PPC folks which puts a different angle on the questions.

First the questions:

Why does paid search earn so many more marketing dollars?
What can SEOs and the SEO industry do to help bring parity to this equation?
Does a down economy mean SEO will be given greater opportunity to perform?

Some points taken from the comments:

PPC is easier to grasp than SEO
PPC is faster to get results
Measurability
SEO is more technical
SEO spend isn’t as trackable (spend for PR, editorial content, sponsorships, etc.)
SEO has expensive up front costs without seeing the return for months, if not years

My thoughts…

I think there are many different reasons for PPC getting more spend than SEO. For one, when looking at larger companies, they’re doing both and a scaled PPC campaign can costs millions per month while I haven’t heard of any SEOs spending millions per month (please correct me if I’m wrong).

Secondly, even in the eye-tracking graphic, you can see that the first listing is a paid listing and that (along with bolded words) is where people’s attention gets drawn to. Today, there are usually 3 listings above the organic restults which take attention and clicks away from them.

Third, control. Paid search allows lots of control over your listings. For any high volume terms, most of the time the organic results point to either the home page or general pages whereas with paid search, you can pretty much point to any page you want and change it anytime you want.

Fourth, volume. Quoting Rand, “SEO drives 75%+ of all search traffic.” This might be true, but if you aren’t #1 or worse yet, not even on the 1st page, how much traffic are you getting? Short answer: not 75%. With PPC, you can usually compete for top positions or at least be shown on page 1 listings for highly targeted keywords. I’d also like to see data on conversion rates, etc. before really caring how much traffic is sent to a site.

Finally, like at least one of the commenters from the original post, I believe that SEO spend isn’t as trackable. You might be able to track what you, as the SEO are doing for the company, but for a large advertiser like Apple - that is mentioned in the news, on TV, has offline advertising, has fanboys, haters, and even fanboy haters, uses product placement and much much more - all of which helps SEO for the keywords they’re targeting AND not targeting, how are you going to attribute for that spend in your numbers? Even when the company releasing a new product helps SEO efforts from all the media, bloggers, etc. talking about it. To be fair, this also happens in PPC, like when a company advertises a promotion on TV, traffic and conversions go up while conversion rates decrease, but the overall effect isn’t as great.

Overall, if politics were completely left out of the equation, each company should always be putting as much money as possible into the areas that are bringing in the best overall ROI for their strategy. If SEO is showing that it’s doing the best, max out your allocation as much as needed until your ROI or at least goals are at the same level as the next highest channel. If that channel is PPC, put whatever budget isn’t needed into PPC and so on. Both SEO and PPC require skill and expertise to be carried out most effectively and both can and should be utilized to grow a business.

If you’re a new website that needs traffic now, start with PPC while keeping SEO as a long term effort (including making sure you’re correctly utilizing on-page SEO factors). I disagree that any company should PLAN on decreasing PPC as SEO takes hold, if anything, you should be increasing both.

If you’re a poor college student starting from scratch, then do what’s free(ish). Use SEO until you can acheive some volume, scale it with PPC and read above for “new websites.”

In the end, I’m left with 3 new questions (partly from above):

How different does the eye-tracking study look today?
It was originally released in 2005. Search results were different (there are now more paid ads showing up before the organic results) and searchers are different
Who converts better?
SEO has turned from being position based (#1 ranking to first page ranking) to becoming ROI based (does the traffic your providing convert?) SEO may bring in 75% of the traffic, but how much of that traffic is looking to make a purchase?
Why are we competing against each other?
Well, obviously, everyone wants more, but offline still has the huge lead in ad spend without nearly as much to show for it. That’s where the real moeny is that both sides should be going after.

Oh, and for the other 2 questions asked by Rand. I feel that the two will most likely never be on par with each other in terms of spend as PPC is a cash cow and both will continue to grow. I think SEO has a greater opportunity to perform during a downturn in the economy, but so does PPC. There may end up being a catch 22 with SEO and a downturn - when business is suffering, you need results right away or else you may not have a business a year from now. For businesses that can afford it, both will end up being one of the last lines to be cut from ad budgets, or at least should be.

and below is some added content from comments that is worth mentioning…

Two good posts within the comments:

For PPC, it is reasonably easy to track spend (at the engines) and most in-house PPC people are full-time (and therefore allocable to PPC). Do the journalists at the NYT count as SEO resource? Arguably they should if they are creating content that people link to. What about the developers who put together Amazon’s affiliate program? I think if you count these forms of ‘SEO’ in the spend, it would be much higher.

In summary, I think two things (that haven’t been mentioned above) then conspire to push PPC spend higher than SEO - the ongoing expense nature of it (for large brands, the ongoing investment in ‘pure’ SEO (i.e. that isn’t content creation or development) can be relatively small if they have got their house in order) - and the allocation problem - it’s easy to tell what is PPC spend, but unless your SEO spend is entirely to an agency, it is hard to work out what should count as ‘SEO’ spend…

Paid search is so attractive and recieves the lions share of the budget because it is so much simpler and so much easily scalable compared to SEO. Scale is what turns businesses into big businesses. SEO, as many of you know, is much more difficult to scale across a business’s many pages, products, offers, websites and business units. Bid more on the stuff that produces positive ROI and less on the stuff that brings negative ROI, right? That brings up another reason why paid search is so much more attractive: trackability. It is quite easy to understand paid search and have a good idea on what is actually happening and what is being paid for. Selling paid search is also easier and simpler than SEO as is outsourcing and stopping it: hire an agency, install their tracking pixel, and wait for the sales to start rolling in. Not happy with their service? Cancel and hire another agency. You get instant results that you can report to your board of directors.

On the other hand, SEO is difficult for some people to understand because it is multi-faceted. Some people think it is simply an IT play while others believe it is just about content. And link development - well thats even more difficult to understand. I have personally seen many huge ecommerce and lead generation companies turn away from great SEO opportunities because of inability to manipulate and alter their website. Perhaps if this was different, the data would be as well. But IT being IT and politics in business always being there, we are faced with a situation that does not always lend itself very well to SEO-based website changes.

Now about the skewed data - I dont know what the numbers are actually reporting exactly but I have a feeling that it is only reporting direct amounts paid to either SEO agencies or internal SEO salaries. I dont think it takes into account the possibility of huge expendatures into IT. Currently, my agency and I are in the middle of a campaign with a Fortune 50 company that needed to completely revamp their un-optimized website(s). The amount they are paying us as a consultant pales in comparison to the internal IT investment they are taking on. I dont believe the stats above represent these types of costs which would greatly swell the SEO investment noted above.

Another good post made by seemingly the only one I felt is managing PPC campaigns just as much or more than SEO campaigns.

Let me tell you about the conversion lift that PPC brings to SEO and vice versa - One company was making roughly $100k/mo from SEO 1 year ago. That seemed to be steady as they ranked in the top 10 for well over 1000 high quality terms. Enter PPC - within 3 months, their new income was at $400k/mo at an expense of $200k/mo on PPC. PPC contributed to doubling their ‘net’ even though the second $100k/mo net was more expensive than that provided by SEO. Their entire net increase could not all be attributed to PPC. We had return visitors, and we noticed that several who clicked on paid search ads would come back via an organic route and vice versa. I would say the doubling of net came because of the natural lift that each (PPC AND SEO) had on the other. Of course, without that added reach and traffic from PPC the SEO may/may not have increased two-fold within 90 days because PPC let us target 10,000+ new keywords/combinations where the company did not have quite the exposure that SEO was currently bringing to the brand/site - coupled with ‘owning’ more real estate for the 1000 or so terms they rank well for.

At the very least, I would never turn off PPC when a client gets top rankings via SEO - the added lift can be incredible. You just have to learn what combination gives you that ROI lift/brand lift. When I say combination, I mean which ad text compliments the organic listing, what position is positive vs negative, when is there a real ROI, etc. It’s all in the analytics. :)

Bottom line for me: SEO is not better than PPC. PPC is not better than SEO. PPC is not easy ‘out of the box’ beyond the surface. SEO is definitely technical. They NEED to work together because they MAKE YOUR CLIENTS MORE MONEY, MAKE YOUR COMPANY MORE MONEY.

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