What’s the ROI on SEO? Hint: SEO Experts Are Underpaid, Opportunity Abounds!

Update: Check out this “How to forecast SEO ROI” article if calculating the ROI on SEO is the info you want.

What follows is an editorial / research article showing that SEO is valuable – but not explaining how to calculate it.

I was asked what the ROI on SEO is a few times at a recent business event, and decided that it was about time someone spoke up for us organic search marketing experts. The sad truth is that we SEO Experts are grossly underpaid! Let’s look at some stats (or damned lies, if you prefer).

According to a SEMPO report, the North American Search Marketing industry grew to $12 Billion in 2007. (Worldwide numbers are unavailable, but presumably much larger.)

According to the same report, 88% of search marketing dollars were spent on PPC while only 10.5% of that went to SEO. Various miscellaneous categories, including an amorphous “technology investment” (Analytics? Content management systems? Web design? Servers? …) capture the remaining handful of percentage points.

An older study from 2004, by Internet Retailer, showed respondents saying that the conversion rate of organic traffic (i.e. the traffic gained from SEO) was greater than that of PPC.

“Nearly one-half—46.1%—maintain that natural search delivers better sales conversions vs. 37.3% who cite pay-per-click as a better conversion generator and 16.6% who say paid and natural search perform equally as well.”

Conversion rate, for those of you who may be newer to the search marketing business, is the percentage of visitors who buy. If 3 out of 100 visitors buy your blue rattle, your conversion rate is 3%. So what the majority of the retailers above are saying, in other words, is that the ROI on SEO is better than that on PPC. This old SEO Chat case study also shares a higher conversion rate on organic results.

But wait, there’s more. Consider the fact that a majority of clicks on a page of search results go to the organic listings. I’ve just spent an hour and can’t figure out the keywords to unlock the studies to “prove” this, but since it’s so commonly known, I’ll ask you to take my word for now. If you do have a study to share on the CTR for SEO vs PPC, I’d be happy to see it.

Update: In the comments, Antonio of Marketing de Busca shared the following great post with data straight from the horse’s mouth: Avinash Kaushik (consultant at Google) cites 86% of clicks as going to the organic results and 14% going to the sponsored listings.

So, to summarize, here’s the situation in the search marketing industry.

  • A landslide majority of the money spent on search marketing
  • Is going to attract a minority of the search engine traffic,
  • Which paid traffic provides a lower ROI than SEO.

Let’s be clear. PPC is a great way to build business and gain sales, and it should be a key part of any balanced search campaign. There’s no doubt about it; only doing SEO can have you waste months optimizing for keywords that convert less well than others you could have targeted!

But there’s also no doubt that there’s a huge ROI opportunity in SEO because such a relatively small percentage of search budgets is going to deliver organic results, not to mention that those results deliver a better ROI than PPC results. I look forward to hearing and responding to your comments, and suggest that if you liked this post, you subscribe to my blog’s RSS feed. You may also care to read this related guest post I wrote entitled, “What Every SEO Needs to Know about Branded Search ROI” and this on the three types of SEO consultant: Good, Rad, and Sexy.

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Comments

  1. I'll have to agree with you there. We do a small amount of SEO work for others and it's hard to justify the time spent sometimes. Spending the same time optimizing and working on our sites usually works better for us in the long run. Think of it this way..... I can make 2k working for you for a few months (couple hours a week). Or I can make 4k to 10k a year working the same effort on a site of ours.

    Comment by ed - May 18, 2008 @ 12:19pm
  2. Ed, you're right on the money! Besides that, I'm seeing some interesting things on your Black Hat Digest :).

    Comment by Gabriel Goldenberg - May 18, 2008 @ 12:30pm
  3. The funny thing is - I know PPC agencies take a share on spend - but most companies spend millions on PPC and only a fraction (I have heard of large cos spending 1/10 of PPC spend on SEO). I can confirm Gab, for one large scale client, ROI on SEO is 5 times higher than PPC, while the spend is 1/7 SEO and the rest PPC. I also know of at least 3 other businesses that see almost the same situation.

    Comment by Rishil - May 19, 2008 @ 3:51am
  4. Rishi, that's exactly what I'm talking about! Now imagine you took just another tenth of the PPC budget and put it into SEO - consider the ROI on that! Or even if they took it from some other area...

    Comment by Gabriel Goldenberg - May 19, 2008 @ 9:57am
  5. We generally don't do PPC management that much but for the clients that we do it for there definitely seems to be a better ROI for organic SEO over PPC. One of my smaller clients spends around the same amount per month on SEO as they do on PPC and PPC traffic generates approximately 10% of the total traffic while organic search engine traffic accounts for around 80% of the traffic, with the last 10% being referral/bookmark. I don’t have access to what % of the traffic converted into sales at the moment but it is probably safe to assume the ROI on the SEO is better than that of the PPC. The other interesting thing from the Sempo findings is that marketers are increasing the PPC/SEO budget by reducing print expenditure. Which is a pretty obvious course of action really but it is interesting how much they can save on marketing by doing this. We had another client that advertised in the national papers quite a lot, the adverts cost them thousands and by pulling just 2 of the adverts they managed to cover all the SEO and PPC costs. With the help of the SEO/PPC they managed to double the enquiries they received within a few months. So even though the ROI on PPC is less than SEO it is still considerably better than that of traditional media.

    Comment by James - May 19, 2008 @ 10:58am
  6. Excellent point there James. However, if you take the case of some sites (I forget the specific example), they've seen success on search and online means and are now working to promote offline and build a brand. So for the smaller businesses, the money may go to search, but then that makes them enough to go back into offline media for the branding.

    Comment by Gabriel Goldenberg - May 19, 2008 @ 5:11pm
  7. "Ed, you’re right on the money! Besides that, I’m seeing some interesting things on your Black Hat Digest :)." Thanks! I'll finish all 30 days eventually :) - I keep thinking of fun things to code and getting sidetracked. Since I've been handing it all though not many folks are complaining :)

    Comment by ed - May 19, 2008 @ 5:35pm
  8. "I’ve just spent an hour and can’t figure out the keywords to unlock the studies to “prove” this, but since it’s so commonly known, I’ll ask you to take my word for now." 14%, according to Avinash, if this is what you are looking for: beussery.com/blog/index.php/2008/02/google-average-number-of-words-per-query-have-increased/

    Comment by António - May 20, 2008 @ 2:07am
  9. We're using decently optimized campaigns for PPC. Organic conversion are WAY higher then our PPC conversion rates. 68% Organic and 32% PPC. Thats DOUBLE! Industry is lead generation in Health Insurance.

    Comment by John - May 20, 2008 @ 11:46pm
  10. Ed, I look forward to seeing that completed. António thanks for sharing. I've updated the post. John - awesome work for you guys. You're obviously real pros!

    Comment by Gabriel Goldenberg - May 22, 2008 @ 1:00am
  11. Gab, Very interesting numbers! Luckily we're all organic and have built our entire revenue stream around it. We're moving into PPC but it's so difficult to compete with the big guys in categories like mortgage, insurance, etc. Do you have any experience or thoughts in trying to find the competitive edge against someone with the higher margin in PPC?

    Comment by Tyler Shears - May 29, 2008 @ 9:37am
  12. Gab, what about the article in NYTimes: http://www.nytimes.com/2008/03/10/business/media/10drill.html?_r=3&ref=business&oref=slogin&oref=slogin&oref=slogin? They say "The study found that paid listings had a slight edge over “organic,” or unpaid, search results: visitors who clicked on paid links were 17 percent more likely to buy something, and they spent about 18 percent more on each order." My experience in employment industry is similar. Paid traffic is around 10% better in terms of conversion, time on site and bounce rate.

    Comment by Paul Montwill - May 30, 2008 @ 4:27am
  13. Tyler, I'm no PPC expert - best to ask people like David Szetela, Amy Konefal or Andrew Goodman. Paul, that's interesting data. I guess it depends on the measurement method. Thanks for sharing the link and your personal experience!

    Comment by Gabriel Goldenberg - June 8, 2008 @ 1:55pm
  14. I think that if you could guarantee your client first-page SERP by doing optimization alone, you'd deserve every penny you could get. But you can't. So you don't. What a ridiculous premise: Of course it's better to show up first in organic search. And probably in some cases you'd get better conversions through organic search click throughs. But there's a reason the vast majority of money goes to PPC: because most clients don't have time to wait around to realize the vague promise of possibly better results in some obscure long-tail search several months down the road. Isn't this obvious?

    Comment by Mark Royko - April 12, 2010 @ 12:52pm
  15. SEO is the long term solution - and ROI is required on all online marketing spend - PPC is the instant lead generator which our clients love - however when we talk SEO and get to the topic of time their eyes glaze over, hands go back behind the head and the wise cracks start. Business needs results and most clients don't have 12 months to generate quality leads thru organic methods in these dark orwellian times. Selling SEO is getting really tough down here in Australia most companies are outsourcing link building to india and pakistan, while offering pay per month fees of $250 or less. So I'm with ed - why try and convince clients about SEO for a low paying contract when I can ump my efforts into my own landing pages and blogs and make more cash? Finally, I think the industry really needs some regulations and common standards - rather than all of us running around the google flame chanting crazy spells to make it rain. (I dont mean offend any native americans here - it is a good visual for the SEO industry!)

    Comment by Anthony Taylor - November 15, 2010 @ 1:15am
  16. Great article and I enjoyed reading your debate afterwards!! I'm currently researching for an article on this subject myself hence the stumble 2 years late ha!

    Comment by Sean - April 3, 2012 @ 6:00pm

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