Importance of SEO for large corporations

2009-12-04 Christoph C. Cemper

04 Dec

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Importance of SEO for large corporations

Today’s SEO Q&A topic is on the importance of SEO for large corporations – uncovering huge potentials and possible reasons why they spend so much money on PPC over SEO.

Over the last couple months, actually the whole last year, we noticed that many large corporations leave a lot of money on the table because they just do not focus enough on SEO. It is so easy to spend huge budgets in PPC. Actually recent studies as well proved that. These studys are from the SEMPO organization or the marketing company Conductor. My colleague from the UK, Patrick Altoft, just wrote about this a couple days ago. He used the following interesting graphic in his article “Natural search vs paid search spend & traffic share for big brand retailers“. On the left graphic you can see that 89.47% of the search clicks are from SEO – i.e. the natural search results. On the right graphic the amount of money spent in SEO vs. PPC is shown.

Organic search traffic ROI vs. Paid Search traffic ROI

10% of the spending yield 90% of traffic

The amazing numbers are that with only 10% of the spending 90% of the traffic comes out of the organic search, natural search results. The other 90% of the money goes to paid search, Google AdWords etc. However, PPC yields only 10% of the traffic. That is crazy right? It is an imbalance and we wondered – why is that?

Why can such a small part of the money for SEO yield such great results in organic and if we have such a great leverage in organic why just not spend more money on organic?

PPC – spend money and receive clicks

Don't get confused!

Matter of fact we think the two models are completely different and not everyone gets it. PPC paid search is a typical media spend model. You spend some money and get some traffic. You spend a Dollar today you get a click today. You can do the same thing tomorrow but if after the day after tomorrow your money is out you will get no clicks at all. As long as you pay everything is fine but as soon as you cut your spendings your traffic drops to zero. While paid search is quite comfortable to plan for (in terms of predictability) – it does not generate sustainable traffic – at all. It’s easy to use if I plan for a great holiday season I might allocate a big media budget to extra PPC campaign, but after the holidays, the effect of traffic increase is mostly gone (expect for some branding effects maybe)

SEO works different than PPC – SEO is an investment

Should you really spend so much money on PPC?

Well for SEO things work a lot different. It is not a quick win, there is no instant gratification on SEO because sometimes you need to work for weeks and even months to get results, to improve your current results. That is why a lot of people believe that PPC is so much better because you can measure it so much easier – and see instant results. Obviously if you get feedback the next day – how great would that be in SEO – but that is not the way it is. By trying to manipulate the organic search results, Google and the other search engines do not make it too easy for us. We do not really know what Google expects, what they like when it comes to SEO, except for our experience and a lot of iterative trial & error. Especially with SEO and link building you need to sit there for weeks and months to monitor the results but once you are there, once you are at the top we can assume that the costs needed for SEO will decrease, actually dramatically.

That is probably what we see in some cases in the surveys. Keep in mind that 10% of the spending for 90% of the traffic is an awesome leverage compared to PPC where it is vice versa – 90% of the cost for 10% of the traffic.

For each PPC click you get 8.5 organic clicks and besides this the opportunity of SEO is 5.66 times higher than the opportunity of PPC. In the following graphic you can see the comparison between PPC and SEO. We wonder why spend money for Adverts at all? It is great to test and to learn the keywords that convert.

Comparison of PPC vs. SEO

SEO Opportunity for big corporations

The big companies are actually in a great position to improve their SEO and just use a little bit more budget for awesome results. Big companies tend to have very old, trusted domains. Old and trusted domains respond a lot better to link building and SEO measures. That means with only a couple of links a month, maybe one or two for each keyword phrase that could be highly targeted and highly converting, you could be number 1. In fact this is what we do for some big corporations. If you get a grasp of opportunity of pushing up you top converting keywords, that could be long tail keywords with two, three or four words with only a couple of links.

Easily outrank competitors

You can easily outrank your competitors!

Why bother spending paid search over the days, weeks and months to get clicks on them if you can outrank your competition with only a couple targeted links per keyword. That would be all it takes. We actually have done that for some large corporations throughout the whole year of 2009. If you have a leverage of almost 1 to 9 in SEO then imagine what would happen if you just add 50% of the budgets to SEO. Take away a little bit from PPC from paid search and move that into SEO. If you would add 5% of your budget to SEO you could do great things with that – easily get an ROI of 1000% on that!

To give you an idea about the budgets, a top retailer like Target spends $ 270,000 a day. That is almost $ 10,000,000 (ten millions) a month and that is really huge. And that means, they are already spending a million dollars for SEO. That is a lot already. Imagine doubling that up or just adding $ 500,000 so you could do so much extra SEO work, extra link building work with that, that it could easily get to an ROI of 50. Simply because there are 8 times more clicks on organic results than on Adwords results. You can capture a much larger share of the traffic. Well that does not convert in all cases but it is still an huge opportunity.

These $ 500,000 extra SEO investment could easily translate into 5 million, 10 million or 20 million ROI if done the right way. And we already do that for some large clients. Targeting highly converting top keywords in SEO is the way to go – for all industries.

What will be the future?

Is SEO the future?

You have to go after the long tail traffic in organic and there are not a lot of companies that already do that. We have done and still do that and we have seen awesome results. In fact we were astonished what’s possible.

We think the question is not “when”, but “who” is already implementing long tail SEO campaigns right now. A lot of companies already do but we have seen other large corporations who simpley even do not get the idea (yet). It appears some organizations do not even understand the enormous possible leverage of investing something into SEO and then reaping the benefits for months and years – freeing up huge future budgets.

Why throw all the money to Google if you can use targeted investments to improve your organic results?

It is not a question of when, but a question of who already does it and who will be next. Hopefully that’s YOU!

So, what do YOU think? Will YOU be next?

We hope this article helps understanding the idea of what Long Tail SEO is all about. It should help you to understand and hopefully tackle this untapped potential in your corporation – A.S.A.P.

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19 Responses to Importance of SEO for large corporations

Jens Buch
December 5, 2009 at 2:04 am
I think this is a very good post and I agree with what you say. BUT…
Let’s take Target as an example (with your numbers). I think it is hard to present your case:
Suggestor: ‘I think we should invest 6m usd in SEO’.
Director: ‘How can we see a return on this?’
Suggestor: ‘Well, if we make it to the top spot it’s easy’
Director: ‘What if we don’t make it to the top spot?’
Suggestor: ‘Then the ROI will be significantly lower. There is also a risk we get penalized by the search engine…then the money would be lost lost’
I think most directors wouldn’t take that risk…they could loose their job for god sake. Online marketing directors already have an edge on their offline counterparts, as they can prove the profitability of their PPC campaigns. From a career perspective large enterprise marketing directors would be crazy to take the SEO investment risk. As always, it is all about risk. This leaves SEO as the way to go for new and/or daring businesses – and it’s also those businesses we see in the top spots in many cases…rightly so.

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Christoph C. Cemper
December 5, 2009 at 1:49 pm
@jens: great point… it’s of course about taking the risk. but come’on – these numbers speak for themselves! I’m not saying that you should drop all PPC – that its important to target, test and optimize the site… but imagine with that target-example they would only take 5% of the monthly budgets of PPC and put that into SEO … that would increase SEO budget by already 50% – image that! … or let’s just take 1% off PPC …

what is 1% given the huge amount of untargetted traffic I’ve seen being bought with huge company PPC campaigns…. frankly, some PPC agencies really just BURN their clients money… taking just 1% out could help them SEOwise big times…

Of course still – you have to have the balls to risk, but that’s what made companies like Google, ebay, Amazon big… they didn’t duck and said “nahh – this crap is too risky…” did they?

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Jens Buch
December 5, 2009 at 6:09 pm
I think we are making the same point Christoph
The numbers definitely speak for themselves…what I am saying is just that I think it is rare that large companies will grab their balls and take the risk. Have a nice weekend.

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Anil Kumar Singh
December 7, 2009 at 11:19 am
I liked the data you are putting here on SEO.

I am 100% agree on you that SEO is an investment and will give better click from search engine.

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Alan Mitchell
December 8, 2009 at 10:52 am
Interesting angle, and the pie charts make your argument all the more convincing.

But despite advertising spending weighted heavily in favour of PPC (which would suggest more opportunity for SEO), I don’t think it’s always practical to take budget out of PPC and invest into SEO.

Of course there will always be opportunities to improve SEO rankings, but diminishing marginal returns will inevitably set in. Once you’ve spent $1m on SEO, spending a second $1m will not deliver anywhere near the ROI of the first ROI.

PPC, however, tends to scale a lot better, especially in long-tail targeting of which we’re still a long way off ( http://www.alanmitchell.com.au/techniques/relevancy-the-holy-grail-of-ppc/ ).

Regarding you’re point about SEO being long-term – I think we’re likely to see it being less so with the recent launch of Google’s real-time search.

As with all marketing mediums, it’s about finding a spending balance, and constant testing to refine that balance.

Thanks for an interesting post,
Alan

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Andreas Pizsa
December 8, 2009 at 11:10 am
Actually I believe that the pie charts pretty much ruin your case right from the beginning. If I get 89% of clicks with 10% of the budget, why would I invest more money in something that already works?

My personal experience is that corporate managers prefer PPC over SEO because PPC is easy to buy; it’s a totally manageable _personal_ risk. And: everyone is doing it.

I’m not saying it’s the right strategy, but in a sense, “nobody ever got fired for buying Adwords”, as they say.

Thanks for the article!

A.

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Bishwajeet Mahato
December 8, 2009 at 1:04 pm
Large companies have guys who want quick results,most of them are driven by non tech guys who know nothing about seo. All they know is profit.

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Kai Spriestersbach
December 8, 2009 at 3:14 pm
I totally agree with you, but don’t totally agree with Jens, because I don’t think it’s always about taking the risk.
Yes it’s true, overoptimization or wrong linkbuilding strategies may cause penalties, but with smart sustainably focused strategies, the investment in SEO is still the best!

With PPC you can reach great sales in short run, but in the long run SEO always will pay off.

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Eloi
December 8, 2009 at 3:59 pm
To be honest they work together.

You need PPC to find out in one week where and what converts, and then you apply that to SEO. Going blind on SEO terms is just insanity. So i could also make a very generic sentence like “SEO is nothing without PPC”… but that would just be ignorant.

One assumption made in this post however is that SEO is a steady investment…. You can’t commit to an SEO spend like you seem to imply, because the algo’s latest developments mean that you will always need some sort of SEO consultancy on the long run… so saying that 1$ spent in SEO is 6 times more valuable than 1$ spent in PPC is a little misleading. Because let’s face it, you are gonna (try to) charge the guy who’s rankings have deteriorated since Google released personalised search…

In any case, you want to make both work together, so that instead of getting either 10% or 90% of the clicks (as the SEOmoz data roughly translates) you get a good share of both.
Remeber it’s different kinds of searchers who click on SEO / PPC results…. And as a company you want the largest share of ALL the searchers ont that term.

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Arihant Kothari
December 9, 2009 at 8:50 am
This ratio of SEO/PPC investment could change in the event that all top results in search engines become real time.

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Jens Buch
December 11, 2009 at 1:34 am
@Kai I am not too sure enterprise directors (not small business directors) always make long term decisions. I know they like to say they do, but remember that they have to publish numbers every 3 months to their shareholders.
Btw: I like the simple design of your website.

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Christoph C. Cemper
December 11, 2009 at 9:04 pm
@andreas: if 10% of my budget result in 90% of my results, I’m dumb to spend the other 90% , no? Why isn’t that a motivation to think about reallocation?

>corporate managers prefer PPC over SEO because PPC is >easy to buy; it’s a totally manageable _personal_ risk. And: >everyone is doing it.
Yes, the me too – that’s where companies (and their management) can stand out IMHO … of course the hockey stick management found it’s way into online – no question…

@Bishwajeet Mahato: “All they know is profit.” – LOL, that’s why they waste 90% of their money on 10% of their result?

@Eloi: yes, SEO+PPC HAVE TO WORK TOGETHER, no question… we call this the “learning budget”… but spending 90% of your money on learning how to spend the remaining 10% is crazy, eh?

>Remeber it’s different kinds of searchers who click on SEO / PPC results…

I think this is wrong as it stands here. This might be true for stupid low-involvement products like ring-tones or such scams, but in general it depends on the topic. and Many industries have contact points in both – PPC and SEO

>And as a company you want the largest share of ALL the >searchers ont that term.
at least you want to spend ALL your budget – LOL – that’s easiest with PPC

@Arihant Kothari: why should realtime search change SEO/PPC investment behaviour? I dont follow you

@all – thanks for your comments – very interesting discussion going on!

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Kai
December 14, 2009 at 10:25 am
@jens yes, curiously enough you are right. shareholder value is a really problem, for them not investing sustainably…

BTW: Check out ma Free Long Tail Keyword Research Tool on http://www.vseo.de based on Google Suggest to find Long Tail combinations with a lot of searches on.

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Christoph C. Cemper
December 15, 2009 at 12:33 am
@Kai – great tool you built – like it

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Brad
January 6, 2010 at 3:09 am
Christoph,

Trying to talk ceo’s of large companies into committing more cash for seo is tough. I agree with what you have to say here to an extent, but I think PPC is still the first choice for many because the results are so easily measurable whereas SEO results take time and are subject to change with Google’s algo’s and other variables we have little control over, in spite of what we do know.

CEO’s are results driven, bottom-line people who only want to know if they spend x what will they get in return? Much easier to answer this if we’re talking in terms of ppc I think.

On the other-hand, seo & ppc are so inherently tied together in such a fashion that without proper seo, clients will wind up paying way more money than they should for ppc.

In spite of the fact that much of what you are saying is true, presenting a case for more seo dollars I think, will remain a tough sell.

I would be interested in hearing what feedback you get using this approach with future prospective clients.

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marck_don
April 28, 2010 at 12:26 pm
Hi all

do you want to suggest/vote on the next SEO Q&A topic?

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@webbprinsessan
December 7, 2010 at 9:54 am
Interesting to see the spend versus roi in traffic as you present it. To your question as to why corporations keep on this track I (who work at one!) think it is basically 2 things.1 is what you know is safe. Is the same mentality as why you keep spending huge budgets on printed annual reports. What will happen if you stop? Scary…. . Tje no 2 is lack of knowledge. I am just starting tje SEO journey where I work and it will be great to see where we’ll be in August next year and in 2-3 years. Lucky for us our industry competition are just as bad at this as we are. Lot of education will be necessary and good examles. Thanks for the post.

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Barry Adams
April 13, 2011 at 10:17 am
I think you’re presenting an overly simplistic scenario here based on the false premise that SEO always yields a #1 position for a given keyword.

Also, you say “the opportunity of SEO is 5.66 times higher than the opportunity of PPC” – what is the source for this number? And what do you mean exactly with ‘opportunity’?

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Another SEO Guy
November 6, 2011 at 11:36 am
Chris, good argument, but do these figures still hold try today?
I know for my org its a different story, so it would be interesting to compare when you created this post to todays data…..

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