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by • 27 October, 2008 • MEDIAComments (0)963

Pay-Per-Click versus Search Engine Optimisation Spend: The Real Deal

We read a lot about digital advertising, and optimising display campaigns because articles are typically published from reputable sources, and easily-read. When it comes to SEO, clear, concise research is harder to come by. So, here’s a diamond-in-the-rough: a no-b.s. piece on SEO versus SEM, and where advertisers can expect the most bang for their buck.

First, to introduce the SEM vs. SEO topic, here’s a glimpse at the kind of priority search has within the online advertising industry: Forrester Research now estimates that search marketing accounts for 39% of all online advertising spending and is expected to account for 44% of online advertising spending by 2010. That means that over a third of all advertising on the Web is currently related to search. To break it down even further, here’s where those search related dollars are going (per the Forrester study):

  • Paid Search Ads (PPC) – 51%
  • PPC Management Fees – 12%
  • Organic Optimization Fees – 11%
  • Other – 11%
  • Contextual Ads (PPC) – 10%
  • Paid Inclusion – 6%

There’s a big disconnect in the way marketing dollars are allocated to search engine focused campaigns. Let me highlight: And, according to C|Net News, June 30, 2008, “[S]earch advertising should continue to be the largest category, growing from $9.1 billion in 2007 to $20.9 billion in 2013.”

OK. So companies in the US spent $10 billion last year on paid search ads, and even more this year. How about SEO? SEMPO data via Massimo Burgio, at SMX Madrid 2008, said SEO gets $1.3 billion ( or 11%), which corresponds with the Forrester Research findings.

According to these data, it’s 11% for SEO and 87% for PPC (with another 1.4% for SEM technologies and <1% for paid Inclusion). Here’s where I get confused:

[Here’s a Google Heatmap showing points on a SRP (Search Results Page) that generate the most click-action]

Heatmap showing areas of Google Search Results Page (SRP) that generate click-action.

Heatmap showing areas of Google Search Results Page (SRP) that generate click-action.

It looks like most users’ eyeballs are on the organic listings – the ones you can only influence with organic SEO… Huh? Maybe we should get more data on this subject. Let’s turn to Enquiro:

Organic Ranking Visibility (The fruits of SEO)

(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%

Sponsored Ad Visibility (SEM)

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

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

Fascinating. So visibility is considerably higher for the organic results. What about clicks?

Thanks to Comscore, we can see that clicks on paid search results has gone down over time, and is now ~22%.

Conclusions: SEO drives 75%+ of all search traffic, yet garners less than 15% of marketing budgets for SEM campaigns. PPC receives less than 25% of all search traffic, yet earns 80%+ of SEM campaign budgets.

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