Paid Search or Organic Search yield better ROI?

Paid Search or Organic Search yields better Return on Investment?

Recently i read two articles, one by Andrew Goodman Relative Complexities of Paid and Organic Search, and Implications for Marketing Effectiveness and another by Marshall Sponder Paid Search superior to Organic for ROI.
They both mentioned the following points:

• Paid Search link works better than Organic for Return on Investment
• Example (taken from their clients’ campaigns):
• Conversion rate for organic: 1.85%
• Conversion rate for paid search: 7.69%
• Organic search referral revenue per click: 8.5 cents (on average)
  
• Paid search referral revenue per click: 19 cents (on average)
  
• Disclaimer: the above conversion rate or revenue per click vary from client to client, campaign to campaign, keyword to keyword, from month 1 to month 3, however, they just give an example to illustrate their point of view
  

• Andrew argued that if assuming there are 600,000 active Adwords accounts, each one use 150 different landing pages, there would be 90,000,000 landing pages (90 mil). Most of these pages make it to the index

Compared that to about 20 billions organic pages in Google’s index (unverified number), this is 200x larger than the paid search index. With the organic pages, they can contain any kind of information and Andrew mentioned that more often than not Search Engine will send users not to the optimal page to yield specific desired action.
This is because marketers have less control over how the title of the organic link, the description will be.
Compared this to paid link where advertiser uses very strong call to action, with proper testing of landing page to see which one yield the best Return on Investment.

• “… it’s a no-brainer that revenue from organic searches will be lower than that from paid searches, in part because high-ranking pages may be “wrong” pages from the site owner’s business standpoint.” Andrew wrote
  
• Marshall went a bit deeper and took a more neutral standpoint with regards to Paid Search and Organic Search.
• He acknowledged that Paid Search somewhat outperforms Organic Search.
  
• However, to him the tricky thing is to try a balance. He quoted one of the example that comparing the two traffic sources Natural Search and Paid Search taken from Google Analytics and Paid Search has a Goal Conversion rate of 0.15% and Natural Search Goal Conversion rate is 0.13%
• He think that if a certain keyword is too expensive, it may make more sense to proceed with SEO for that term rather than trying to use Paid search for that term.
  

• Chris G jumped in and said that the picture is actually much bigger the synergy between Paid Search and Organic Search. He referred to the fact that if a site is big enough (thousands of indexed pages in my opinion) then searcher will have a choice and through natural selection, a better landing page for each keyword will reveal.

At the same time, one can’t ignore the fact that SEO might be able to cater for more niche keywords that are non existence in Paid Search campaign. However, with a good PPC managers, overtime, all those keywords will be added in through keyword mining and stripping.

Personally, i think both Andrew and Marshall raised very interesting and challenging questions. The answer is not easy to find and it can differ depending on each situation.

Assuming that you have X amount of dollars, how do you decide how much you should put in Paid Search and how much you should spend for SEO (provided that you hire someone, In house or Outsource to do SEO for you)?

Well i think first of all marketers need to do an analysis of their business and objective of the whole Search Engine marketing idea.
They need to understand that PPC can yield immediate results (bringing traffic within hours) whereas SEO is more for mid and long term ( 6 to 12 months).
Generally, SEO and PPC works well together and both of them should be employed at the same time. You should first started SEO for your brand (if you are not no 1 yet!!!), your main product lines etc…

One important point that both Andrew and Marshall missed out is that users nowadays can search multiple times before making decision, and the whole user’s journey. The conversion rule “first cookie wins”, “last cookie wins”, “evenly distributed” etc will become very important when calculating ROI.
Generally i feel that with the widely used “last cookie wins” rule, natural search will outperform paid search for brand related terms whereas Paid Search will outperform for generic terms.
The reason i feel that way is because for branded related terms, if people type in your brand name, that means they already know about you and you listing probably will be number 1 or 2 on the search engine result page (SERP).
For generic terms, people are in a more considering stage. Hence the easily customizable ad text of paid search will be useful. With that you will be able to test and gradually present the best ad copy to yield optimal results, like promotion related, time sensitivity etc…
You can refer to the Search marketing handbook for more information.

One could argue that if you want to expand your business, you need to reach out to people who don’t know about you yet, Avinash Kaushik (author of “Web analytics: an hour a day”).

Well i think that it’s much more complicated than that. It depends on how far you want to go into the rabbit hole.
With the right analytics tool, one that enable you to choose different conversion rule on the fly you would be in the position to really dive into the data gathered and ….. (well, make your own conclusion). 😀 I can guarantee that it’s very complex trying to understand the user behavior especially when you take into account multiple online channels like banners, blog, social networking, search etc…
It’s not easy to understand and evaluate the role of SEM in the marketing mix.

And so my conclusion is:

• Do Paid Search and SEO at the same time if possible
• If you have small budget or need to decide whether or not to go with just one channel, contact me Chandler 😛 It really is a case to case basis
• Use a good web analytics tool and more Importantly Learn how to read, understand and use the data gather…