Is Your Search Marketing Budget Allocation Right?

Navneet Virk

In the field of search engine marketing, paid listings in the search engines are often flaunted as the most effective way of deriving quality traffic to the websites, the recent surveys and research present a different scenario.

With the enormous growth of internet in the last decade, the opportunities associated with it have also expanded. Millions of businesses are running exclusively online and thousands of businesses are operating to help the online businesses run efficiently and get better Return On Investment (ROI). Search engines have apparently become the biggest source of user traffic to the online businesses. While paid listings in the search engines are flaunted as the most effective way of deriving quality traffic to the websites, the recent surveys and research present a different scenario.

About 80 percent of people, who have internet access, use search engines as their first tool to search what they are looking for. Effective online strategy would be to grab the user at the point of entry, that is, search engines.

Businesses are doing all they can to harness the search engines, unfortunately the search engine marketing (SEM) budgets need to be reanalyzed and restructured. According to recently released research from SEMPO, the bulk of search engine marketing (SEM) spending goes to paid placement ads. About 83% of the online marketing budget last year (2004) was spent on the paid placement and it is projected to reach up to 85% this year (2005). In contrast, less than 10% of SEM spending is devoted to boosting organic search placement through SEO efforts or paid inclusion.

However, if you look at the preferences and trust level of the search users, it appears that paid search ads might not be the most effective form of search engine marketing (SEM).

Surveys and research results by major marketing research companies indicate that the current spending pattern might not be the most effective way for marketers to make money off search. In fact, assuming a static SEM budget, spending more to create higher natural search results and somewhat less for paid search advertising can obtain better conversion results—especially when you factor in the behavior and attitudes of search engine users. Another factor to be considered while projecting your future paid listings budget is the rising average cost of buying keywords. With more and more advertisers entering the paid search arena, and users increasingly clicking on paid search ads, the rising cost for keywords contributes greatly to spending growth. According to Jupiter Research, the average price per click for paid search will rise from 36 cents in 2004 to 47 cents in 2009. Most of the search engine marketing experts agree that with rising paid keyword prices, it’s going to be incumbent on the advertisers to buy keywords more efficiently and explore more cost effective ways of driving traffic to their business sites.

Organic search engine optimization (SEO) of the website makes a lot of sense while exploring the possibilities of getting constant quality traffic. While SEO is often misunderstood as some sort of spam trick, SEO works over time to increase a company’s organic listing rankings for appropriate keywords and can give the most impressive ROI in the longer run.

Most importantly, natural listings are far more likely to attract users and get clicks than paid search ads. Survey done by Enquiro in April 2004 shows that 66.3% of search engine users say that they click on organic listings in the search engine result pages (SERPs) before clicking to sponsored link. Only 23.1% of respondents choose to click on any type of sponsored link before an organic one.

The factors that the organic search engine listings are more relevant and most users trust that the information is unbiased, add up to generate more click through ratio from the searchers. And simply because organic search listings are not advertising, six out of 10 Internet users deem such results most relevant, according to iProspect. This proves that no matter how the results are listed/presented, US Internet users perceive organic search results as more relevant than paid search advertisements. The more experienced the user, for instance, the more likely he or she will choose organic over paid search listings. Research further reveals that more than 70 percent of search engine users are aware of the difference between natural and paid listings.

Marketers who reallocate a small portion of their paid search budgets toward SEO efforts will tend to get higher conversion rates, since users tend to prefer organic listings over advertising. Therefore, with the user as the manager of the search link’s destiny, enhancing organic rankings will tend to harvest more responses than putting the vast majority of a search marketing budget into paid advertising—over 80%, as is currently the case.

More and more bigger companies are realizing the potential of organic search engine optimization (“We realized to have a long-term play; we had to have an SEO campaign.” — Les Kruger, SeniorOnline Marketing Manager,AT&T Wireless;CMO Magazine,December 2004)

If you are one of the businesses who tend to put more effort in paide listings than the organic search engine optimization, its time to rethink.

About The Author

Navneet Virk is the seasoned search engine marketing consutant for www.seo-expert.com, Internet marketing and creative services company based in New York.

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