SEO and Paid Search: A Parable of Two Retailers

July 31, 2014

Digital Marketing Tansy OBryant By Tansy OBryant

Search engine optimization (SEO) can be a confusing topic, even for experienced marketers. For one thing, the rules are always changing. Search engines frequently update the algorithms used to determine webpage rankings. What’s more, managing both your paid and organic search strategies can be a balancing act, leaving many retailers wondering whether they have their priorities — and their budgets — straight.

To help break things down, let’s look at two completely opposite (and two completely made-up) examples.

Sally’s Sports and Oliver’s Office Outlet are both new companies with monthly digital marketing budgets of $10,000. Sally’s Sports decides to invest this entire sum in organic search (SEO), while Oliver’s Office Outlet decides to devote the same amount to paid search (in this case, Google AdWords). Neither retailer had previously spent any budget on their chosen strategy.

Though these examples are simplistic — most companies are savvy enough to invest in more than one digital marketing channel — we hope to illustrate the benefits and differences of each strategy and how far your investment will take you.

Retailer 1: Sally’s Sports tackles SEO

SEO1Sally’s Sports allocates all of their $10,000 marketing budget to SEO. They want to optimise their web properties while they’re still new, rather than retroactively update them down the road.

Getting Started: Sally’s Sports creates tags for their webpages and builds out their link strategy. Their in-house team starts a sports-focused blog to build visibility and keywords. Through this optimization work, Sally’s Sports attracts around 5,000 low-impression keywords to their site. They experience a small (1.5 to 1) ROI in the first three months. Altogether, their initial SEO efforts take almost 30 hours a week — which means they spend less time on other marketing priorities.

The Midpoint: By the end of the second quarter, the company’s SEO efforts begin to bear fruit, and they spend only ten hours a week on SEO. With their optimization strategy in place, their keywords grow to 30,000, which leads to increased traffic and conversions on their website. So far, their SEO has generated $40,000 in profits. Given this success, Sally’s Sports decides to reduce SEO spending to $2,000 per month.

One Year Later: Sally’s Sports is pleased with their SEO progress. They notice, though, that their website’s organic listing is always pushed below the top two paid search ads, especially on mobile devices. On the other hand, by refining their tags and website architecture, their product pages now include all the data they’d need for listing on Amazon.

Just when Sally’s Sports thinks their strategy is moving along fairly well, they wake up to find that Google has updated the Panda search algorithm. Their organic traffic fluctuates downward, and their keyword dominance shifts. Sally’s Sports regrets cutting their spend — SEO just seemed less expensive when visibility and reach were growing.

Retailer 2: Oliver’s Office Outlet sticks to paid search

SEO2Oliver’s Office Outlet decides to invest their $10,000 digital marketing budget in paid search, or pay-per-click (PPC) ads. Because they need to repay their startup costs soon, they’re looking for a channel that will generate profits quickly. Though they considered SEO, they don’t want to wait three to six months for an SEO investment to pay off.

Getting Started: Oliver’s Office Outlet buys 500 keywords using Google AdWords and bids on several variations of high-impression keywords. They immediately see ROI of 2 to 1.They’re pleasantly surprised that they’re spending only ten hours a week managing their campaigns. Even better, they see campaign profitability of $10,000 within the first three months. They decide to invest 25% of that back into their AdWords campaigns. As a result, they now have 750 keywords and $12,500 in spend that generates $12,500 in profit.

The Midpoint: By the end of the second quarter, Oliver’s Office Outlet is spending more and more time on paid search, especially as they add more keywords. They check their campaigns at least once a day — to adjust bids, search for keywords and monitor competitors. With so much energy spent on paid search, there’s less time for other business priorities.

One Year Later: Every time Oliver’s Office Outlet thinks they’re getting ahead, their cost per click (CPC) increases. Their paid search strategies are becoming more complex and harder to manage. New competitors show up every day, and the company’s not sure their paid search efforts are differentiating them from their competitors. They could hire a new employee to help out, but that would double their AdWords reinvestment cost. They feel like they’re borrowing from tomorrow to pay for today.

The moral of the story

Sally and Oliver happen to meet at the 2014 School Supply Summit, where they discover they both sell the same line of ultralight, waterproof (and all-around amazing) backpacks. One thing leads to another and they start discussing their digital marketing strategies. Each retailer begins to understand the merits of the other retailer’s preferred channel. Sally thinks paid search could buffer her company from changes in search engine algorithms. Oliver realises that an SEO strategy could reduce the time and money his company spends on paid search.

It was the beginning of a beautiful business relationship.

Takeaways: What you need to know

Though these examples aren’t exactly realistic, they highlight a few basic best practices for balancing your paid search and SEO:

  • Save for a rainy day. Leave some extra slack in your SEO budget for algorithm changes, which could dramatically alter your strategy.

  • Look up, look ahead. Recognize when the demands of managing your PPC campaigns are encroaching on your ability to make other business choices. A warning sign is being so focused on your campaigns that you can’t look beyond the next 30 days.

  • Diversify. Both SEO and PPC have their benefits, but focusing too much on one without the other can lead you to overlook other key components of your business. Think of SEO and PPC as two foundational pillars of a larger digital marketing strategy.

 

Blog post by Tansy Obryant, ChannelAdvisor SEO strategist.


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