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July 27, 2011

SEO, Paid Search, and Scalability – The Myths and Realities – A SPN Exclusive Article

I recently attended a SEM seminar where the speaker, a SEO consultant, tried to show how scalable SEO is. Then he compared it with paid search, which, he said, was not scalable. As a PPC consultant, I found this irritating. Not only was he wrong but he was also peddling the standard myths about the relative ROI’s of these two SEM strategies.

What Is Scalability?

In case you’re not sure, I’ll explain scalability. This means that over time the gap between sales and costs widens so that your business or products become more profitable.

In the context of SEM, scalability occurs in any one of three ways. When simultaneously your marketing costs fall and sales value rises. Or sales remain the same, but don’t cost you as much to acquire. Or marketing costs remain the same but sales value rises. Whichever way, you have scalable (rising) margins.

SEO and Scalability

The speaker promoting SEO scalability showed us a very convincing graph. His example was a company just starting out with search engine optimization and hiring an agency. He put the agency cost to the client at $1000 per month for 12 months. On his graph, this represented a straight line.

Now he graphed out the sales that would result from this SEO work of getting the client’s website ranked on Google’s first page. At first, sales value was zero. Within three months, the two lines on the graph had met. Then, sales value began and continued to rise well above the static cost line. QED: SEO scalability.

But he didn’t stop there. In addition, he argued that once the agency had established the website in the top rankings, the client could start reducing her expenditure on SEO. Consequently, the straight cost line would begin to fall while sales continued to rise or remain stable. Thus, a professionally run SEO strategy could turn out to be even more scalable.

The Reality

He was making a valid point. In an ideal situation where you have big bucks and can afford to spend these on SEO consultants to trounce the competition, this could be the outcome.

But it’s not realistic for the average business. It’s certainly not easy to achieve where budgets are limited and where markets are highly competitive. Getting good rankings for good keywords is never easy.

And even if you could spend the big bucks there’s still no certainty that with SEO you would ever make first page rankings, or if you do, that you’ll stay there.

What’s more, to get the full benefit of being on the first page, you really need to rank in the top three positions. In general, these grab around two thirds of clicks, with #1 getting over 40%. And to reach that level that takes a lot of SEO input, and usually a long time.

The true situation for most companies just starting SEO, even if they are using an agency, is that if they do get first page rankings it’s likely to be for the low volume, less competitive keywords. At least that will be the case for a considerable time.

This should help sales, but it will certainly not produce them in huge numbers.

Also, with ongoing competition and changes in algorithms, SEO activity never really stops. And rarely do SEO agency costs.

So, let’s keep the true ROI and scalability of SEO in perspective.

Paid Search and Scalability

Next, he revealed his paid search graph. Each month, his imaginary client’s advertising costs were $5,000, producing sales of $15,000. He argued that this ratio of 3:1 would more or less remain static. In other words, the graph’s two lines, costs and sales, would follow the same path and the gap would never widen. QED: PPC is not scalable and the ROI is static.

Well, good PPC management would create some scalability. It would reduce click costs and increase conversions (sales). But, this alone would not match the level potentially offered by SEO.

On the other hand, there’s a way in which paid search can create major scalability.

The opportunity arises when you take a different view of PPC. You see it not as a one-off selling medium but as a strategy for acquiring new customers. Of course, whether you can exploit pay per click in this way depends on the extent of your product range. Also, on how often people are likely to rebuy your products or services within a reasonable time.

If these factors are favorable, in my experience, PPC advertising is about customers finding you first by clicking your ad and in that way making the initial purchase. But then subsequently coming back to your site directly (not through PPC) to rebuy or cross-buy. In this way, paid search has a potentially natural scalability.

But Does SEO Not Achieve the Same End?

Of course, it can. You can just as easily get repeat buys from customers who found your site through the SEO effort.

But the advantage that PPC has is that there is no real risk. The speaker’s SEO client could have spent her $12,000 and got nothing or very little in return. Indeed, you can go on forever chucking money into the SEO well with not a shred of success guaranteed.

That wouldn’t happen with PPC. With paid search, the results are clear, fast, and measurable. And you can stop spending money instantly if you conclude that it’s not working.

It can take a long time, a much thinner wallet, and a lot of heartbreak before you can reach that conclusion with SEO.

Tom Wilson is an expert in Internet marketing and an award-winning marketer. He specializes in
ppc management and AdWords Training and has been providing marketing services, and consultancy for over 10 years. He is a Chartered Marketer, and a Google AdWords qualified professional. Visit his website