In the search industry, there are several questions I feel we’re asked by marketing savvy clients over and over again.  These questions keep re-appearing because they’re not only good questions, but typically ones where answers are extremely tough to come by.

The PPC vs. Organic Debate

One of my favorite questions has recently been put to bed by a study done on Hewlett-Packard’s organic and PPC traffic share.  That question is: “Do Paid search campaigns cannibalize organic revenue, or add incremental value especially when a brand ranks well for their primary terms?”

Well the answer is in.

In the study, posted on search engine land, a year’s worth of US paid and organic campaign data was analyzed from the Imaging and Printing Group (IPG) of Hewlett-Packard.  The data included clicks and visit data from when at least one organic listing and a paid ad were both triggered by the same keyword phrase.  My favorite part is that the study accounted for more than $10 million in direct online sales for each channel. This means that the data-set was large enough to get some statistically accurate numbers, and flesh out some concrete answers.

The Results

The data showed that Paid search drove a 3.2% higher net revenue per visit (NRPV) than organic search.  The NRPV was calculated by subtracting the paid cost from the paid revenue so that it could be compared to the revenue per organic visit, which (in this study) had no cost attributed to it.

Note: As a search agency with many successful clients, I can tell you that organic visits do actually have a cost associated with them. The effort/time that would typically be attributed to the overall cost would be measured by what the agency bills the client, as well as any billable hours put towards the search efforts (excluding any reporting costs).

Do people click more on Organic listings or Paid ads?

Cited from search engine land: “When IPG had a number one organic listing, consumers still clicked and converted on paid listings nearly 40 percent (39.6) of the time. And because the NRPV of paid search is 3.2 percent higher, net paid revenue share rose to 41.6 percent of total revenue.”

This means that when it comes to click share, 40% of searchers clicked a paid ad, while the other 60% clicked the #1 organic position for the same company.

When the organic positions appeared lower, understandably, paid search picked up more of the clicks.  In the study, organic click share fell to 33 percent when organic listings were in positions 2 to 5, and to just ten percent when the same listings appeared in 6 through 10.

What about Revenue Share?

Matching the click share data against revenue, showed that in this case, 42% of revenue was generated from paid search.  Keep in mind though, that this percentage is still not perfect, because the study didn’t take into account possible costs of organic SEO.

When the organic positions fall off of page one, PPC’s net revenue per visit was 305% higher than organic.

Hold up though, if I run PPC campaigns, am I paying for clicks I’d get anyway?

The short answer is not really.  A research study conducted by David Chan of Google in May 2012, showed that 50% of clicks on ads are not typically replaced by clicks on organic search results.

This means that incorporating a quality PPC strategy with a well executed organic strategy will generate more qualified clicks for a website, than focusing on just one or the other.

Worth noting, the study by Chan, focused only clicks, not conversions.  This does leave the door open for some variability from industry to industry.  However, from our experience, we’ve seen paid search convert at a somewhat higher rate than organic due to the control a company has over the PPC landing page vs. the page that ranks in the organic listings.

What about Brand Terms?

Organic search for brand terms did provide an increase in click share at 53.4% vs. 47.6%.  That means that even when a paid ad and organic listing both appeared for a brand term, the users tended to click on the organic listing vs. the paid.  Once again, the net revenue per visit came close to matching the click share numbers with 53.5% or net revenue per visit coming from organic, while 46.5% of net revenue per visit came from paid search.

That’s great, but what about my non-branded money terms?

Paid search held 77.2% click share for non-branded terms, while organic non-branded search terms had 22.8%.  This means that way more people clicked on a paid ad, then the organic.  This would also imply that more people click on the paid ads, then previously thought.

So what can we take away from this?

This study puts to rest the questions and controversy surrounding paid search for brands that have strong organic coverage.  The study indicates that visitors from paid search tend to be more profitable than those arriving from organic search engines.  However the profit/keyword is relative to what a company is spending on organic search optimization, and how well a PPC campaign is being managed.

This means that while organic search is still very important to both traffic and brand credibility, paid search should always be included in a true holistic internet marketing plan.

All in all, these finding are not exactly surprising.  If you’ve managed large ad spends, and conduct large scale SEO campaigns, then your gut has probably suggested something like this all along the way.  This report also brings to light the importance of the recent introduction of the Paid & Organic reporting available for marketers in the Adwords platform.  Chances are Google’s known about these facts for some time. There’s most likely a reason that Google wants marketers to have access to the true comparison of PPC vs. Organic search, side by side, as it will allow more marketers to explain the value of Google Adwords to their clients.