Before getting into search engine optimization (SEO), I always accepted paid search, or pay-per-click (PPC) as some refer to it and its pricing model, as a necessary means of advertising. It was something unquestioned and costly, but it was the lifeblood of search engine marketing (SEM). Nowadays, I’m less convinced. There’s an SEO-PPC budgeting disparity that doesn’t proportionally allocate spend to clicks.
Here’s a quick SEM refresher:
- Paid Search – The more popular advertising medium, which is not-so-coincidentally more expensive. Using the pay-per-click model, advertisers will bid for the most popular keywords until they outrank one another, which may involve outbidding everyone else.
- Search Engine Optimization – Not so much a direct advertisement as it is a set of targeted strategies aimed at improving a site’s organic listings. These strategies are grounded in web development, user experience, and search engine functions.
As the internet is largely accessed through search engines, SEM is certainly a necessity; however, its individual components are not treated equally. Current industry practices show that ad spend is funneled into paid search. I’m not a fan of this. PPC requires money to have an impact, and it’s also the biggest constraint for small biz owners. Of course, you could always manipulate it for branding purposes–having your ad appear but avoiding the clicks through positioning–but it’s bold since someone’s bound to click (or many are) at some point, but more importantly there’s no way to guarantee or track an actual impression.
SEO, on the other hand, is long-term: a sound site won’t require a constant flow of cash to continue performing well down the road—though tweaks are sure to be made. A thorough understanding of how search engines work can salvage any digital campaign you launch, deriving value out of a failed social media campaign, for example.
Furthermore, there’s the quantity of clicks to consider: an ad is pretty useless unless there’s an interaction, be it view or click. Internet-wide publications, like this one, cite an estimated 25%-30% clickthrough rate for sponsored results. Professors Jansen and Spink estimate, in their publication “Investigating Customer Click Through Behavior with Integrated Sponsored and Nonsponsored Results” (2009), that the actual figure is lower at an average of 15% or less for the most popular key terms.
So what’s this mean? Let’s start comparing the ratio of clicks with the ratio of ad spend:
- Let’s assume 20% of clicks from a search engine result page (SERP) are on a paid listing
- About $180 million per month is spent on PPC, whereas $18 million per month is spent on SEO outsourcing and consulting. For the sake of simple math, let’s exclude in-house SEO. These numbers are coming from the 2010 SEOmoz industry survey.
Of the estimated $198 million spent monthly on SEM, about 9% of the typical budget is spent on SEO while 91% is spent on PPC. That’s 9% of a budget allocated for 80% of organic clicks while 91% of spend allocated for 20% of PPC clicks. This seems to support the budgeting disparity. It’s a situation similar to how companies used to spend more on print media a few years back despite the little amount of time spent reading newspapers/magazines, compared to the majority of time spent online. Good thing this no longer holds true.
To wrap up, I don’t claim that this brief calculation or my sources to be perfect—as there were a lot of assumptions—but I’m hoping that this will stimulate some thought-provoking conversation.
So, how do you budget for SEO and PPC?