Pay Per Click VS SEO: Where is your Money Going

Organic Search Listings Provide a Higher ROI Yet Paid Search Listings Dominate the Internet Marketing Budgets

“Men Lie, Women Lie, Numbers don’t Lie.” ~Jay Z, AMA Acceptance Speech

You don’t need to be an accountant or a Jay Z fan to understand the truth in that statement. When it comes to Internet marketing dollars roughly 85% of all dollars are spent on paid listings and only 11% are allocated to Search Engine Optimization. In 2010 Google generated roughly $30 BILLION in revenue, 97% of that coming from Internet advertisers. Why not? Paid advertising allows a company to show as a relevant result to a targeted customer instantly!

When it comes to marketing dollars companies are always seeking a ROI, sometimes a good ROI blinds company representatives to other equally or more effective methods of advertising online.

Enter SEO: Search Engine Optimization

Search Engine Optimization is not a science, it’s an art. As such there are quite a few skeptics regarding what an SEO firm can do for them. But we will discuss that at a later date, right now I want to show you some data regarding user behavior and discuss potential ROI.

COMSCORE.com has shown us that only 21% of users click on paid advertising yet paid advertising generates 85% of the revenue.

In addition, according to an eyetools.com study of user eye movement while searching the web, it found that the vast majority of users view results from top down and left to right.

The image below is the “Google Heatmap” that shows you where the majority of eyes go during a search.

This Heatmap reveals where most user look during a Google Search

PPC VS SEO

Also the data is broken down into easily understood numbers:

Organic Ranking Visibility

(shown in a percentage of participants looking at a listing in this location)

Rank 1 – 100%
Rank 2 – 100%
Rank 3 – 100%
Rank 4 – 85%
Rank 5 – 60%
Rank 6 – 50%
Rank 7 – 50%
Rank 8 – 30%
Rank 9 – 30%
Rank 10 – 20%

Side sponsored ad visibility

(shown in percentage of participants looking at an ad in this location)

1 – 50%
2 – 40%
3 – 30%
4 – 20%
5 – 10%
6 – 10%
7 – 10%
8 – 10%

The numbers above show that even the 7th result in a Google search has as much visibility as the 1st result in a side sponsored ad.

Want some more numbers? Lets conduct a little mathematical experiment to see what the potential value of SEO can be vs PPC.

For this experiment we are going to be very conservative with certain assumptions regarding an organic result but at the same time we are going to be very generous with our assumptions regarding a PPC result.

We have already discovered that PPC results are clicked on 21% of the time and organic results are clicked 75% of the time. Lets also make these assumptions:

  • The Cost Per Click to Your company is $5
  • The Search Volume of your keyword target is 5000 searches per month
  • Your PPC ad is so convincing that of all the ads on the page YOURS manages to get a 45% share of the PPC volume
  • Lets also assume that an organic listing on page 1 gets a paltry 10% share of the organic volume
  • Lets assume that the lifetime value of a converted click is $500
  • Lets assume that the conversion rate for both is 3%
  • Lets assume you are paying $1000 per month for SEO

Based on these numbers we have the following data for the PPC results-follow along!

Search volume of 5000 PPC gets 21% of that so that is 1050 people that will click on ONE of the ads on the page.

We have determined that even though there is likely 10 or 11 paid results YOUR amazing ad gains a 45% share of all the PPC results. 1050×45% leaves you with 472.5 clicks on YOUR ad. Lets round up to 473.

We also have settled on a 3% conversion rate, so 473 clicks times 3% is 14.19 conversions, again lets round up to 15.

So now you have 15 sales and each sale has a lifetime value of $500, so you made a tidy $7500 from that ad.

The ad itself cost you $5 per click and you had 473 clicks, so you spent $2365 to make that $7500 or a profit of  $5135!!

Amazing right? I agree, that is a very nice return on investment, lets look at an organic result.

Remember that the organic result gets 75% of all clicks, so a search volume of 5000 per month gets 3750 clicks.

We also agreed that the organic listing has nowhere near the amazing click through rate of your incredible paid listing, we settled on 10%, so your site gets 375 of those clicks.

Now using the same conversion rate of 3% we made 11 sales and the value of each sale is $500 so that is a total value of $5500. We ended up spending $1000 for the SEO work so we made $4500.

PPC wins right? $5135 vs $4500! In the words of Lee Corso “Not so fast my friend!”

Using any online ROI calculator you get these figures: PPC ROI= 217.1%, Organic ROI=450%

Remember for our calculations we assumed you got a 45% share of all the PPC results and only a 10% share of the Organic results. Truth be told you will very likely have a lower share of the PPC results and a larger share of the Organic results depending on your placement in the rankings.

So which option is best? The answer is BOTH!

If you have the means you should combine a PPC campaign with an SEO campaign and get the benefit of both. Remember a paid listing is nearly instant but when you stop paying your disappearence from the results is also instant.

On the other hand an SEO campaign may take some time to develop however depending on the length of your campaign the benefits of your ranking may last weeks or months after you stop paying for SEO.

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