Posted by: Marshall Sponder | March 13, 2008

Paid Search superior to Organic for ROI – Traffik

In a post that Andrew Goodman wrote today he notes that Paid Search is actually more profitable than Organic Search and here’s why:

“… 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.”

I’m actually going to test that assertion in accounts where I have access to paid and organic ROI – but I can see that Paid tends to perform better as its more highly focused whereas, as Andrew noted, organic traffic from Search can be coming from a variety of pages, many of which aren’t the right ones.

For example – take a client’s site that runs paid and organic

Organic had 1 out of 54 visits converting – in this case subscribing to a newsletter

Paid Search has 1 out of every 13 visits converting.

Overall, based on the above numbers – a Paid Search Visitor was 4 times more likely to “convert” than one that came from Natural (Organic Search) – mostly due to the quality of the pages that Search Engines, particularly Google rank near the top of results.

Interesting and sobering thoughts – one that makes you wonder if the limit of how well this site is going to do has more to do with how much it’s willing to pay and how well it’s doing it’s paid optimization – and the rest of the factors are relatively minor.

And the case below is real…. I bet I could replicate it many, many times.

Unlike Andrew, I don’t really believe people should go out of the way to do a lot of Paid Search – But ….. if you want a lot of ROI but don’t want to spend much or any money ….. well … you get what you paid for – nuff said.

Perhaps the only calculation one could do beyond what I’ve presented here is calculate if by spending less and making less – you still come out ahead – I think if keywords being bid on were really expensive – than perhaps getting more traffic from Organic and spending less for Paid makes a lot of sense.

Let me make up an example – say I spend $2500 per month on Paid Search (and that drove me 54 Conversions each worth 100 bucks each) then each conversion would cost me about  46 dollars.   Ok, not that bad, I spent 46 dollars and I made 100 dollars – I can live with that.

On the other hand, I see that if I spent nothing and just did Organic SEO (I’d still have to pay someone to do that for me unless I tried doing it myself – a lot of people do try – but they have very limited success) – did nothing but let Google drive traffic and I made I might do OK but I’d need four times the traffic to make what I could have made with a targeted campaign.

The ideal situation will be somewhere in the middle – but it’s tricky to cut back Paid too much thinking Organic will pick up the slack because your never sure how much leaving on the table. 

Advertisements

Responses

  1. I think it’s great that you asked the question of your data.

    But I wish we’d see these analyses presented with an indication of the amount of statistical confidence. A difference of a fiftieth of a percent is not going to be significant (i.e. trustable) with that small number of visits even for a binomial distribution (subscribed, did not subscribe). It’s not that I don’t believe the numbers. There’s no better estimate or predictor available, given the data. It’s just that I’m bothered by how the web analytics world relies on simple tabulations and ratios without any understanding of the probability aspect of statistics. And the analytics programs perpetuate this by continuing to offer no estimation-confidence capability at all. I’ll bet that fewer than 5% of web analytics practitioners have, much less apply, any understanding of statistical confidence, significance, or reliability.

    Here’s an example of how flimsy numbers can be. If just one of your 8212 PPC visitors who signed up had, instead, not signed up, then your stats would display as .13% for both.

    Also, I often see the OPPOSITE pattern (from what you saw) regarding the quality of natural vs PPC. Not always, but it’s worth considering for the big picture. Usually the better performance of natural seems to be because natural search DOES hit the mark better. Once reason is that organic search responds to more unexpected niche terms that we don’t (yet) have PPC listings for, as well as more misspellings. The more specific or niche a search is, the better the conversion seems to be (according to analysis I did last year). In addition, natural search often produces more than one listing for a site if the site is big enough, and the visitor is able to choose according to what they think is appropriate – kind of a natural self-selection that can work to the advantage of natural search. This tends to happen best when enough attention has been paid to the SEO aspects of the site’s pages, especially good vocabulary.

    Of course a tightly managed PPC program will eventually outperform natural search for the situations I described above. The niche terms will be added to the PPC program, and the landing pages that produce the best results in natural search will be used to adjust the destination page for individual PPC listings. Also, it shouldn’t be overlooked that the PPC descriptive and title text can be adjusted using visitor behavior much more easily than the natural listing text can.

  2. Hi Chris,

    Agreed, I’ve never taken a statistics course but I noticed that Omniture’s Visual Sciences platform that I’ve begun to work with at Monster Worldwide does include, as part of the platform, statistical analysis of confidence factors next to data that can be pulled.

    I don’t see that in the other Web Analytics Platforms I’ve worked (and working with) so your right.

    I could have pulled data from a few more clients to get more of a spread – I tried to do something quick with a client that already had a goal set up in Google Analytics and use that as a conversion – but I see we could put a bit farther.

    BTW, what do you think of my idea of a program that tells you when and advertiser should invest more (or less) in their Paid Campaign9s) based on the actual metrics collected?

  3. I stand corrected then. Good for Omniture!

    Regarding the program idea – gosh, who could NOT think that is a good idea?! I think the added value would be in the stats that go into the model. Whether a natural search listing appears alongside the PPC listing for a given keyword would be a biggie, because there would be legitimate questions about whether, for that term, PPC should actually be turned off. Profit margins would have to be used instead of just the net value of a click. And so forth. Sounds like fun to put together.

  4. Or, rather, good for Visual Sciences!


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Categories

%d bloggers like this: