PPC Firms Making 45x More than SEO Campaigns

In a great piece of research from the Search Insider Summit in Park City, UT showing the disparity of spending between pay per click and natural search engine optimization campaigns.

Even though SEO is more cost effective, drives more traffic and is sustainable for the long term, it receives less of the marketing budget than paid search.

• 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

Pay per click marketing budgets are increasing while natural search budgets are slowly declining.

• 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)

PPC is easier for clients to value and agencies to measure. As a result, online marketing agencies are devoting the lions share of their budget to Adwords, Adcenter and YSM and businesses are spending more dollars to get that traffic.

This should help convince SEO firms that they bring true value to the internet marketing world and easily prove it is a good long term investment.
other studies with traffic studies

• Hitwise
• Enquiro
• Comscore

See the full report from SEOmoz here.