ROI of SEO vs PPC (Pay Per Click Search Advertising) - The Compounding Power of Search Engine Optimization Explained
In this blog article and podcast, we are going to talk about the ROI of search engine optimization (known as SEO) versus the ROI of pay per click advertising (known as PPC). The goal of this blog article and podcast is to clearly show which has the better return on investment, and explain the compounding power of search engine optimization in a simple, easy to understand explanation.
- On average companies who invest in SEO see a return on investment of 200% to 300%
- On average companies that invest is PPC generate a negative return on investment from their PPC advertising
- Search engine optimization has a better long-term ROI because of the compounding power of SEO efforts
- Search engine optimization is like owning a home, where as pay per click advertising is like renting an apartment (read more below)
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How SEO And PPC Is Like Owning A Home Or Renting An Apartment
SEO vs PPC is similar to buying vs renting a home. When one buys a home they build up equity. The initial cost of buying is much higher than renting, but over time buying will reach equilibrium with renting and eventually surpass it in terms of cost effectiveness. Every payment a homeowner makes increases the equity they have in their home. Every payment a renter makes is simply gone, with no long lasting equity to show for it.
Defining SEO and PPC
Search Engine Optimization (also referred to as SEO)
SEO is the process of maximizing the number of visitors to a particular website by ensuring that the site appears high on the list of results returned by a search engine. All content for a particular keyword is pitted against each other by Google and other search engines to determine what pages to display. The most relevant and highest quality pages are shown at the top of Google by Google’s search algorithm. Google wants to put the best content on the front page and at the top of the first page since they want searchers to be satisfied with Google’s services.
A key component of Profitworks SEO services is adding additional pages to your website with new information that will effectively market your company. The reason for this is that when you consistently add new pages to your website, you will be increasing the number of pages on your site significantly over time. With each new page, you will be adding a new opportunity to rank for a keyword, to obtain PageRank, and to engage visitors.
You will naturally have more links to move people from one page to another around your website, improving engagement. You also have more pages of information that other websites can link to, establishing your authority through backlinks.
Each page on your website that meets these criteria will increase your search engine ranking. Think of each page as a new opportunity to try to attain the top rank for a given search phrase. For more detailed information on what SEO exactly entails, listen to some of our previous podcasts.
Pay Per Click Advertising (also reffered to as PPC)
PPC is the process of paying in order to be displayed on a Google search in form of an advertisement. These are the ads noted with the yellow "Ad" icon at the top of the search results as well as all of the results in the far right-hand column. Anyone can set up an Adwords budget of a set amount per month.
With a Google Adwords PPC advertising account, you can tell Google which keywords you would like to be shown for and then Google will display that user’s website in the paid/sponsored section of Google searches matching those keywords. Part of the Adwords budget is used up every time a searcher clicks on the ad. Google will display the ad enough the max out the budget every month, but never go over.
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How Much ROI Can be Achieved via SEO vs PPC?
Both SEO and PPC will affect the ROI of your website. The exact amount that the ROI will be affected will depend on many factors such as the nature of the product being sold, competitors, etc. The ROI over time of SEO and PPC can be compared with relative certainty however using the following example:
A business is testing out both an SEO model and a PPC model for their website in order to increase the sales results of their site. Both plans are set up with a $500 per month budget.
The PPC plan uses that $500 to bring in an additional 300 visitors to the site every month, and of those extra 300 visitors, 5 fill out an order/quote form, making them a conversion. The website is receiving 5 additional conversions every month for $500, or, in other words, they are paying $100 per conversion. Let's assuming each conversion equals $200 dollars in revenue and $100 in profit that is an extra $1,000 in sales per month and an additional $500 in profit. This rate will never change as Adwords does not fluctuate greatly in the traffic it brings in. With the budget and keywords the customer sets up, they will always get approximately 300 visitors a month, and assuming their website has a conversion rate of 1.5% they will have an additional 4-5 conversions every month, approximately an additional $1,000 in revenue per month and an additional $500 in profit per month.
An SEO plan with a company like Profitworks will use the $500 to create an approach that is centered around ranking organically for keywords specific to the customer’s website. This will be achieved by creating pages to target specific keywords. Over time, the SEO plan will have created dozens of additional pages for the website. Initially these pages will only bring in a few extra visitors, but as the site’s quality grows (which is the core of SEO) Google will send more and more visitors to the website. Over time, this organic traffic will overtake the paid traffic from PPC, and continue to grow without any limit put on traffic per month. While the SEO plan was only bringing in an extra 50 visitors per month, it is now bringing in an extra 1000 visitors per month.
Applying that conversion rate of 1.5% that brings the total conversions to 15, or, in other words, $33 per conversion. Again if 1 customer is worth $200 in sales and $100 in profit that is an additional $3,000 in revenue per month and an additional $1,500 in profit per month. That is a 3x higher revenue and profit than PPC. Where the PPC campaign from this example would always generated a 0% return on investment (the additional profit equals the cost of the PPC), the SEO campaign is generating a return on investment of 200% ($1,500 in profit and a $500 cost) which will increase and improve over time.
How Far Can PPC and SEO Go?
PPC will go as far as your budget goes. The more you spend the more traffic you will get. If you cancel your PPC plan all of that traffic will instantly disappear. With an SEO solution there is no limit to the amount of traffic your site can receive. As the quality of your website grows more and more visitors will come. This increase in traffic will show Google that your site is high quality, and as such they will rank you higher, which allows even more traffic to come in. In the event that an SEO plan is canceled, all of the work done to create pages and rank for additional keywords will remain. This means that there will be no initial drop in traffic in the event of halting SEO. SEO vs PPC is similar to buying vs renting a home. When one buys a home they build up equity. The initial cost of buying is much higher than renting, but over time buying will reach equilibrium with renting and eventually surpass it in terms of cost effectiveness. Every payment a homeowner makes increases the equity they have in their home. Every payment a renter makes is simply gone, with no long lasting equity to show for it.
What is the Return on Investment from SEO?
Profitworks heavily focuses on tracking returns on investment and delivering a positive return on investment for all of its clients. From our experience most good marketing programs usually return a return on investment of between 50% to 150%. SEO usually returns above average returns on investment versus other marketing methods. It has been our experience that usually good SEO services generate a return on investment of 200% to 300%. Or another way of stating it would be that it usually generates $2.00 to $3.00 for every dollar spent on SEO services
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