Is PPC Too Expensive?

Though I'm usually alone at my computer (unless you count the dog), I do have some great virtual colleagues. One of these is Tami Dowers at Onsharp. She does paid search marketing there, while I specialize in optimization for organic search.

Yesterday, Tami said, "I hear people saying that PPC is expensive, but I think they don't calculate the ROI on other marketing methods."

She has an excellent point. I'm one of those who thinks PPC is expensive. I've seen costs per conversion of more than $1,000. And while I work with clients to get those costs down, I haven't been positive enough about such campaigns to add them to my repertoire of services beyond doing it by request.

However, Tami was pointing out that most companies don't track the ROI of their other marketing as well as they do the cost per conversion of their PPC campaigns.

Just how much do you spend on TV or radio ads, and how many customers come to you as a result? Exactly what did your last trade show or direct mail campaign cost you, and how many sales resulted?

Most companies don't really know. The costs of the trade show get sorted out into travel, printing, and payroll as well as marketing. The broadcasting can't be measured precisely -- even those who are careful about testing and include coupons or special offers usually just compare one campaign to another, rather than calculating the cost per conversion.

I've written before about the costs of SEO vs. PPC and I think organic search is generally going to give you more for your money. However, comparing PPC with other forms of marketing may show a different picture.

As Tami put it, "I have a nice hot lead in my pocket: what's it worth to you? It depends on your business."

Fifty Million Frenchmen Can't Be Wrong,or the Adwords Experiment

"Fifty Million Frenchmen Can't Be Wrong" was a hit song in 1927, and the phrase was used thereafter to describe the logical fallacy known as the Bandwagon Fallacy: the idea that if a lot of people believe something, it must be true.

I kind of felt this way about pay per click advertising at search engine results pages. I've never seen a client get better results with PPC than with organic search, but it must be good because lots of people do it.

So, when a large company offered me $100 worth of PPC, I figured I'd give it a try.

I made a new page with a special offer. I didn't link it up to the rest of my site or tell anyone about it, place links anywhere, or indeed do anything to encourage organic search.

During the time of the campaign, I had a grand total of 118 visits to this page. 22 of them came from the ads.

Here's where the rest came from:

• 26 from organic search at Google
  
• 24 from a link some stranger gave the page at their website
• 15 from other search engines
• 10 direct
• 9 from random social media links -- people mentioning it at Myspace, for example
• 2 from Amazon.com, and I have no explanation for that
• one each from a variety of email links and other random stuff
  

In all, there were 25 different sources. The ads were only the third most frequent, even though this special landing page was essentially a secret, isolated page which shouldn't have had any traffic at all. The ads weren't a great source of traffic, and that's what I usually see among clients who do PPC.

However, there were 22 visits to the page in the week after the ad campaign ended, and none at all since then. It appears that the ad campaign did something, even if it didn't drive much of the traffic to the page.

There were, in case you're wondering, no actual contacts or leads at all.

I'm going to continue to suggest, when I'm asked, that clients go with ads on specific websites that are well targeted to their customers. That's where I've seen people have real success with ads. I'm not going to do any PPC myself.

However, it does appear that there is some benefit -- if only as a result of people who see the ad spreading the word.

PPC vs. SEO

I'm not an expert at pay per click. While I had a chat once with a guy who actually is an expert at it, and he assured me that it's all about the landing pages, my experience of PPC is analyzing its effectiveness for my clients, and it never seems to be doing them much good.

The conversion rate is invariably far lower than that for organic search or referrals from high-quality links, the traffic is never stellar, and the time spent on the site tends to verge on the insulting.

So my position on PPC, when I'm asked, tends to be that it's outside my realm, but it never seems to do much for the people I work with. Oh, and I'm told it's all about the landing page. Good luck.

Here's some data from SEOmoz that suggests that it's not just me (I'm quoting here -- click on the link to read the whole article):

• For every 1 click on a paid search result, the organic results generate 8.5 clicks (this is on a keyword parity basis, not counting those search results that have no paid ads)
• Based on action/conversion tracking, paid search clicks convert, on average, at 1.5X the rate of organic clicks (no surprise, since that ad text and landing page is custom optimized by the advertiser)
• From the numbers above, we can see that the opportunity from organic search is 5.66X that of paid search
• Across the board ad spending (via SEMPO):
  • 2004 was 85% PPC vs. 12% Organic
  • 2005 was 87% PPC vs. 11% Organic
  • 2006 was 87% PPC vs. 12% Organic
  • 2007 was 88% PPC vs. 10% Organic
• Spend on SEO is 1/8th of PPC
• Paid Search Agencies earn, on average 10% of their clients' PPC spend (this number may actually be low)
• By this logic, SEO Agencies earn 1/45th (1 / 5.66 x 8) as much as paid search agencies (from a direct keyword-to-conversion path perspective)

Now, SEOMoz is written for SEOs, and so the focus here is on the fact that we make less than we're worth, if you compare the value of organic improvements in search with the value of pay per click campaigns. But from the point of view of businesses, this can be good news -- SEO is cheaper and more cost-effective than PPC.

And these figures assume a higher conversion rate, too, which I have never yet seen. The actual figures for my clients would be more extreme than this.

I plan to refer people to this data when asked in future.