Explanation and Details

Unlike SEO, if the price or labor time for PPC management is too low to support well-qualified and well-paid talent, or if you pay for too few hours of talent, you’ll almost certainly end up worse of than if you did no PPC at all. A few years ago, some fields of business had an aggregate investment in PPC that was low enough that mediocre PPC management could earn positive ROI. Few if any such field exist now. PPC entails many critical variables that your competitors are constantly manipulating – bid amounts, ad copy for every ad, landing page text and offers, ad groups, day-parting, seasonality, “quality score” variables, conversion rate and profit reporting, etc. – so do you really think that $2000 or 15 hours will engineer enduring victory? Good software helps PPC, but as this site’s PPC home page explains, “PPC is an eminently human endeavor, amplified by subservient software.” Either save your toe, or take the dive.

But thanks to your competitors, “there’s always room at the top,” even if the climb takes more exertion (that is, cash) than you anticipated. A severe shortage of qualified PPC professionals and the general paucity of sufficient literacy in America means that almost any business can win in PPC if you choose trained talent and give her enough time. (For more, see the reprint of DISC’s June ‘08 Visibility Magazine article, “Supply and Demand of Literacy in SEM”. The flip side of this equation is that winning in PPC requires, on average, ever more labor cost, pushing successful PPC ever further from the reach of small business (or small-minded big business).

This ruthless logic whereby increased competition offers disproportionate rewards for bold investors, applies to SEO as well, but less consistently than in PPC. Some parts of SEO can actually depress organic positions if done by a half-informed person, but some parts will help if a newcomer reads and follows the rules. In short, PPC brooks no wannabes, while SEO is more forgiving.

Over the last three years, studies have reported differing conclusions about traffic and conversion rates of SEO vs. PPC. Studies report that between 80% and 90% of clicks from search engines come from organic listings. A 2005 Marketing Sherpa study showed that organic referrals convert at 4.2%, vs 3.6% for PPC. A large study by Engine Ready in 2008 showed PPC had about a 17% edge (probably due to the more precise targeting of PPC advertising). Wide variations are to be expected among different industries and between business-to-business and business-to-consumer web sites.

"Click Fraud" further reduces PPC's ROI relative to SEO. Certain industries are much more prone to click fraud, and DISC will advise you on whether you need to install third-party solutions. Click fraud is the practice of clicking on a text advertisement served by a search engine for the sole purpose of forcing the advertiser to pay for the click. Using manual clicks or, much worse, software that simulates human clicks from different IP addresses around the world, your competitors can rapidly rack up your click charges. Also, web publishers that display your PPC ads through contextual advertising can earn revenue by implementing fraudulent clicks. Google, Yahoo, and Bing detect some of this fraud, as can various third-party solutions, but there are ways to evade this detection. This is a threat to the whole search engine industry as well as to individual advertisers, yet SEO is immune to click fraud because the absence of click charges eliminates incentives and rewards.