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Search Engine Metrics… Organic Search vs. Paid Placement

by: Lawrence Deon

Let me preface this report by citing advertisers in 2004 have spent 4 Billion dollars on search engine marketing according to (SEMPO) the Search Engine Marketing Professional Organization.

Website marketers cited Search engine positioning was the top method to drive traffic to their sites (66%), followed by email marketing (54%). Source: Direct Marketing Association. Accordingly, the most cost effective way to market your web site online is to obtain several top 10-search engine rankings in the major search engines for your keywords.

According to a recent Jupiter Research Survey, searching on the search engines is one of the main uses of the Internet among 79% of users. Source: September 2002 Jupiter Research Survey. So that being the case, whatever your promoting you’ll want to make sure it can be found on the first page of the search engines results page.

The reason is numerically simple. An Iprospect Survey in 2002 reported that 78% of web users abandon their search if the first 3 pages don't provide an answer to their question, and 28% don’t scroll past the 2nd page of results. Source: Media Post article reporting results of Spring 2002 IProspect survey.

Combine those facts with the Internets explosive growth rate of 1.8 Million people worldwide going online every week for the very first time, Source: Official Guide To Internet Promotion and you can soon appreciate what a top 10 ranking can mean to you.
Google receives approximately 39.4% of all search engine traffic. Yahoo receives approximately 30.4%. They’re simply the largest search engines being utilized online today.

Bringing up the rear is MSN at 29.6%, and AOL 15.5% then Ask Jeeves with 8.5%. Source: Nielsen//NetRatings January 2004

How much traffic is that? Well, Google and its partner sites were reporting a whopping 250 million searches a day in February 2003.

Overture and its partners were reporting over 167 million searches per day. Inktomi reported 80 million followed by LookSmart with 45 million per day.

FindWhat reported 33 million while Ask Jeeves reported 20 million, Alta Vista reported 18 million and finally Fast reported 12 Million searches per day. Source: Searchenginewatch.com 2004.

With all said, you can easily see how your search engine rankings are directly proportional to the traffic your web site receives, and your site traffic is directly related to your potential to profit online.

Oh, and in case your wondering how much money is spent online; a recent Forrester Research Report indicated that online spending reached $95,700,000,000 million in 2003!
That's a cool 95.7 billion dollars. Projected online spending is estimated to grow to $229 billion in 2008! A whopping 139% increase in online spending! Source: Forrester Research

Now with these facts in mind I’m confident you can clearly see what a top 10-search engine ranking can mean for your bottom line. Although it does leave a question unanswered in my mind, what has a higher ROI… organic search engine optimization or paid search?

According to SEMPO’s key analysis, the U.S. & Canadian SEM Industry Size Estimate by tactic in 2004, organic SEO accounted for 12% of the market share or $492,057,200 while Paid Placement accounted for $3,341,878,176 or 81.8%.

Interestingly, 9 out of 10 respondents are actively engaged in organic SEM marketing programs accounting for 89% of the respondent advertisers. This trend can be contributed to the average cost of popular keywords continuing to escalate.

If the escalation continues to rise it could make paid search engine advertising exponentially cost prohibitive for all but the largest advertisers… the 900lb gorillas!

Simply put, ROI is outpacing inflation: SEMPO’s key analysis indicates advertisers could afford to pay on average 33% more for their keywords and remain profitable, while they say prices have gone up 26% on average in the last 12 months. That’s leaves a 7% advertising margin to maintain current profits for 2005!

SEMPO’s data also noted that advertisers will get smarter about managing their paid placement programs before they cut back on spending.

This is also consistent with a report released by Nielsen/NetRatings indicating that the growing demand for search engine advertising is outstripping the supply of currently available advertising space.

These findings seem to indicate the inventory of keywords is approaching a critical demand problem however; most advertisers felt they still have some degree of price flexibility in their paid placement programs before they will reach the threshold of diminishing returns.

Is there any wonder why organic search engine positioning has gained popularity for online marketers in 2004? Could it be higher (ROI) return on investments?

SEMPO also cites that 43% of advertiser respondents have shifted their budgets away from other marketing programs for Organic SEO.

So what does it all mean? Let the numbers speak for themselves.

Organic SEO is undeniably gaining favor over the lower ROI paid advertising. This is evidenced by virtue of the fact that paid advertising is becoming less profitable.

Although paid advertising will continue to hold a large portion of the market share, as paid advertising returns diminish and keyword costs soar my early 2005 forecast is for the materialization of a progressive organic SEO market trend to facilitate the need for advertising space.

copyright 2005 Lawrence Deon

About the author:
Lawrence Deon is an SEO/SEM Consultant and author of the popular search engine optimization and marketing model Ranking Your Way To The Bank.

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