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Finding the balance between organic search marketing and paid search marketing
The web analytics firm WebSideStory recently conducted a study of conversion patterns amongst visitors to business-to-consumer (B2C) e-commerce websites. The study (http://www.websidestory.com/company/news-events/press-releases/2006-09-22.html), which had a sample size of 57 million search engine visits over a period of 8 months this year, measured order conversions during the same visitor session. The finding: visits from paid search advertising converted only marginally better than visits from natural search results. While the former converted into an order at a conversion rate of 3.4%, visits originating from organic search results converted at 3.13%.

Before we delve into the implications of the above results, it is important to emphasize that these results should not be viewed in absolute terms. There are numerous variables and unknowns that can switch the “balance of power” either way. Moreover, it also needs to be clearly understood that the study does not translate to a reflection of ROI of the two types of search marketing either. (In fact, as the latest MarketingSherpa Search Engine Marketing Benchmark Report suggests, SEO efforts tend to yield a better ROI than paid search marketing—based on what marketers themselves have said).

The main implication of the WebSideStory study, according to us, is fairly simple: search marketers cannot ignore any one of these two forms of search marketing at the cost of the other. Prioritize by all means, but don’t ignore. If you are a marketer, you will have to use a combination of organic search engine traffic and pay per click advertising and optimize the allocation of spend depending on your objectives from time to time. This is a view that is gaining considerable momentum now as search marketing matures and we have the benefit of much better web analytics.

Strategizing SEO & PPC spend: balancing the opportunities and risks
Since search engine marketing is becoming an integral part of the marketing budgets of organizations, though admittedly there is a still quite some way to go before it gets a much larger share of the pie, the challenge is definitely to allocate the spend strategically, taking into account the short term and long term objectives.

Very often though, search marketing gets viewed only from the immediate short-term perspective— the need to meet sales targets for a quarter, for example. That may explain why paid search marketing gets allocated significantly more monetary resources by companies and SEO gets much lower priority.

However, what tends to be ignored is that visibility in the first few results can make a significant difference to a company’s marketing efforts—it has almost become indispensable. Yet, it is a process that takes sustained effort and considerable amount of time. 

A well-executed paid search advertising campaign will generate immediate results; however, the results are a function of the amount of money that can be put into the campaign. As soon as the funding stops, the sales or leads stop coming in.

To put it in broader business terms, PPC makes a difference to the immediate cash flow of companies, in terms of both inflow and outflow; the effects of an organic SEO campaign take much longer to make a perceptible difference to a company’s financials. However, with SEO, the law of decreasing investments generally applies ie. the investment required to continue to get the same level of results becomes lower after a certain level of optimization is achieved.

Of course, one is vulnerable to the changing search engine algorithms when solely dependent on organic search engine traffic. On the other hand, paid search marketing is immune (at least to a very large extent) to these changes, which means there is a greater predictability to the results one can obtain.

Therefore, investing in SEO and PPC is effectively about balancing the opportunities and the risks associated with both of these approaches. The most prudent choice is to take a long term view of the marketing goals and then breaking down those goals into various interim milestones, and allocating search engine spend accordingly to meet those interim goals optimally. The ultimate goal must be to maximize returns while reducing the acquisition cost.