More and more companies, large and small, are embracing the concept of search marketing. That's exciting progress for what is still a fairly new industry, but that doesn't mean that our work in educating people about search marketing is done. Far from it. In fact, while speaking with a client earlier this week, I realized that there's still a lot of confusion about the different types of search marketing and how companies should decide where to put their marketing dollars.

Forrester Research now estimates that search marketing accounts for 39% of all online advertising spending and is expected to account for 44% of online advertising spending by 2010. That means that over a third of all advertising on the Web is currently related to search. To break it down even further, here's where those search related dollars are going:

  • Paid Search Ads (PPC) - 51%
  • PPC Management Fees - 12%
  • Organic Optimization Fees - 11%
  • Other - 11%
  • Contextual Ads (PPC) - 10%
  • Paid Inclusion - 6%

While the terminology in the industry can vary depending on who you are speaking to, I thought I'd try and put things into categories for this client to help them see the bigger picture. So, I broke the idea of search marketing up into three concepts; Search Engine Marketing (SEM), Search Engine Optimization (SEO) and Pay-Per-Click Advertising (PPC.)

Search Engine Marketing

I explained to my client that the overall concept of search related marketing could be thought of as Search Engine Marketing (SEM.) SEM involves absolutely everything about your marketing via search. It includes keyword-based advertising buys, contextual search buys, organic optimization, ROI analysis of campaigns, in other words...the big picture. Most companies doing business online should be engaging in Search Engine Marketing.

Search Engine Optimization

Next, we hit Search Engine Optimization (SEO), which I explained as the actual changes made to a Web site to help it rank better in the organic search listings of the various search engines. This includes things like re-doing navigation, copy edits, fixing any issues like session IDs or cookies, and anything else that requires a coding change to a Web site. It also includes things like link building and some might even say that it includes paid inclusion programs. Some companies doing business online should limit their search dollars to Search Engine Optimization.

Pay-Per-Click Advertising

Finally, I touched on the idea of Pay-Per-Click (PPC) advertising through programs like AdWords and Yahoo! Search Marketing. This includes the selection of keywords, the setup of accounts, determination of bid levels, and so on. Some companies doing business online should limit their search dollars to Pay-Per-Click Advertising.

Which to Choose?

In an ideal world, companies would practice Search Engine Marketing. They would be doing a little bit of everything (organic, PPC, paid inclusion) and tracking how it all works together. PPC would be used to test keyword phrases before embarking on new organic optimization programs, organic optimization would be used to help lower the need for PPC advertising, and so on.

The problem is that many companies that I've spoken with are putting all their eggs in one basket. They are either throwing their entire budget toward PPC and hoping that it will deliver, or they are spending massive amounts of money on organic search while ignoring the possible ROI that a well managed PPC campaign could deliver.

But how can a company decide where their dollars should go? How do you know if you should split your budget 50/50, 40/60 or even 80/20 between PPC and organic search? Well, it really depends on your industry, your ability to track ROI, and the savvy of your search marketing staff.

How Well Can You Track Your ROI?

Some companies are pre-disposed to being able to track the ROI on a PPC campaign very carefully. Web sites that sell products online, or feature a clear call to action are usually quite successful at tracking the conversion rates and profit levels of individual keyword phrases. This gives them the ability to make bidding adjustments on a phrase by phrase level in order to get the maximum return on their investment. This makes PPC a pretty attractive option. After all, a company that knows it will make $2.00 for every $1.00 it spends will be happy to throw as much money as they can at a PPC campaign.

For these companies, the cost of a PPC campaign is often far more sensible than the time and effort that are required for an organic optimization campaign. Budgets can be adjusted up and down depending on the time of year, campaigns can be dropped if demand outweighs supply, and perhaps most importantly for many companies, the results are immediate. For highly competitive areas, PPC is often the absolute best choice for a company's search marketing dollars and their overall strategy should reflect that.

On the other hand, some companies have a difficult time tracking the actual conversions produced by PPC. Service based companies are a great example. Some of these companies have a difficult time following the trail of click to purchase. Sure, you can track lead generation, but what if your industry generates more phone inquiries than web-based form inquiries? You could certainly ask your callers where they heard about you, but what are the chances that you're going to get them to tell you the exact keyword phrase and the exact engine that they used to find you? They're pretty slim. Thus, there's a good chance that even though you might be able to measure an overall increase in leads or phone calls when you setup a PPC campaign, you're going to have a very difficult time tracking the success of individual keyword phrases and making edits accordingly.

In those types of situations, organic optimization is often the best choice. While it's still next to impossible to track the actual impact of each and every targeted keyword phrase for service based companies, the associated costs of improving an organic listing are usually lower and have a longer-lasting impact. Tracking of these campaigns tends to be less precise and more big-picture, with companies watching a steady rise in business associated with a steady rise in rankings for current and new phrases.

Additionally, sites that are informational, non-profit, or in non-competitive areas often have a hard time justifying the ongoing expense of purchasing pay-per-click ads for keyword phrases, especially in industries that are non-competitive.

Based on the example above, it's easy enough to see that some companies will do best putting more money toward Pay-Per-Click advertising and some will do best putting a majority of their money toward Search Engine Optimization. Either way, companies need to take the time to think through how they will measure the success of a campaign, how long they want to put money toward a campaign and how competitive a particular industry is. Only after thinking these issues through should a company decide where they want to spend their marketing dollars.

Discuss this article in the Small Business Ideas forum.
May 6, 2005

Jennifer Laycock is the Editor of Search Engine Guide, the Social Media Faculty Chair for MarketMotive and offers small business social media strategy & consulting. Jennifer enjoys the challenge of finding unique and creative ways to connect with consumers without spending a fortune in marketing dollars. Though she now prefers to work with small businesses, Jennifer’s clients have included companies like Verizon, American Greetings and Highlights for Children.

Search Engine Guide > Jennifer Laycock > Deciding Where to Spend Your SEM Dollars