How should you spend your search marketing budgets: on paid search advertising or search engine optimization?

It often depends on whom you ask.

Last month, I moderated a panel at SES San Francisco that explored that issue. Rand Fishkin, CEO of SEOmoz.org, and Benu Aggarwal, president of Milestone Internet Marketing, made the case for SEO. Arguments for SEO included the great land grab that exists for placement in local, news, blog, video, image, product feeds, and Web results and the opportunity for much better return on investment, based upon how much might be spent on the time/staff/agency necessary for the rollout of SEO. Rand contended that “PPC is easier” (which might lead you to believe that he’s “pro” PPC), but then said “that’s not a competitive advantage”. In other words, anyone can do PPC. It is actually a competitive advantage for people who put effort into a sound SEO strategy, because so many others (competitors) just can’t seem to get their act together.

Thomas Bindl, CEO of Refined Labs GmbH and Melanie Mitchell, SVP, search strategy at Digitas, made the case for PPC (define). They said it offers flexibility in spending, quick results, ability to adjust quickly, less reliance on IT/Web team to modify to the website, full transparency (pretty easy to understand), targeting options, available, and the location of the paid results in relation to organic results, with the influx of universal search and other things taking up the above-the-fold real estate.

Despite these divergent views, participants on the SEO-PPC panel seemed to agree that there are some very good reasons why you should do both. You can learn which keywords are performing from paid search and develop organic strategies to go after these, naturally. Proper optimization of pages leads to better Quality Scores for paid search. You can own as much real estate as possible on the page. You can leave less space for the competition. Then, there’s the 1+1=3 argument, which involves the thought that a presence in both leads to a multiplier effect on the amount of clicks that you can gain.

PPC Versus SEO: An Elusive Balancing Act

Because many companies are now preparing their 2011 marketing budgets, I thought it was a good time to examine what companies may actually be doing.

A look at the SEMPO State of Search Engine Marketing Report – 2010 by eConsultancy) makes one thing clear: search engine optimization is not getting enough attention, focus, and budget.

Here are a few select questions and responses from that survey:

Question: What was your company’s budget for search engine optimization (organic search) in 2009? (Including agency, staff, and technology costs)

Responses:
9 percent said zero
43 percent: $1.00 – $25,000
18 percent: $25,000 – $75,000
13 percent: $75,001 – $150,000
The remaining 16 percent spent anywhere from $150,001 to more than $3 million on search engine optimization, in 2009.

Mind you, this is a SEMPO survey. Nine percent of respondents spent $0.00 (absolutely nothing) on search engine optimization? Not a dime, even when asked to include “agency, staff and technology costs.”

Next question…

Question: What was your company’s budget for paid search (PPC) in 2009? (Including media, agency, staff and technology costs)

Responses:
2 percent said zero
29 percent: $1 – $25,000
17 percent: $25,001 – $75,000
8 percent: $75,001 – $150,000
8 percent: $150,001 – $250,000
7 percent: $250,001 – $500,000
10 percent: $500,000 – $1,000,000
10 percent: $1,000,000 – $3,000,000
4 percent: $3,000,001 – $5,000,000
The remaining 6 percent said they spent anywhere from $5,000,001 to more than $10,000,000 per year on paid search advertising.

What’s interesting about this is that, according to comScore’s paid click report and comScore Marketer search intelligence tool, 92 percent of all clicks are organic and 8 percent of all clicks are via paid search.

Next question (this one really got my goat)…

Question: Spend on search engine optimization by company size (revenue)

Responses:

28 percent of the biggest companies (those with revenues exceeding $1 billion per year) surveyed spent nothing on search engine optimization.

You can imagine how crazy this seems to me. I mean, even if companies were to budget for SEO for strictly reputation management purposes, you would think that there would be some budget allocated to search engine optimization. Judging by what I have seen from some of the largest e-commerce websites, I’m not completely surprised to see this, however. There are many top retailers that blindly funded paid search initiatives without much thought of how they might actually gain some efficiency by spending a little time and money on search engine optimization.

Next question…

Question: Budget for paid search by company size (revenue)

Responses:

0 percent of the biggest companies spent $0.00 on paid search. In fact, only 1 percent of the biggest companies “only” spent $1 to $25,000, in 2009.

The largest spend bracket for the biggest companies, for paid search in 2009, was the $5,000,000 to $10,000,000 per year, with 63 percent of the biggest companies saying that they spent this much in 2009.

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