Paid Search: An industry in decline?

by Patrick Altoft on May 16, 2009 / 8 responses

Ever since Google launched the AdWords program there has been huge disparity between the amount of money businesses are willing to spend every month on PPC compared to organic SEO. Although quite understandable (every business likes guaranteed ROI) it’s also extremely frustrating because organic search has the potential to send so much more traffic at a much lower cost.

This week it seems like the balance of power might finally be turning away from PPC as data released from both Hitwise & Comscore shows a decline in the number of paid clicks compared to organic clicks.

The Hitwise data shows that:

In the four weeks to May 9, 2009, 7.25% of search engine traffic to All Categories of websites was from paid clicks. This compares to 9.84% in the same four week period in 2008 – representing a 26% decline in the share of paid clicks.

If paid search traffic has a 7.25% share of traffic then for every £10,000 you spend on AdWords you should be spending £127,931 on SEO assuming all keywords have equal value (which of course they don’t).

Longer queries

The Comscore data shows an even more interesting trend – the number of paid clicks is growing at a much slower rate than the number of search queries. The raw number of queries carried out is up 68% over the past 2 years and yet the number of users clicking on a PPC advert is up just 18% over the same time period.

The decline is apparently due to a reduction in ad coverage (the number of search queries that trigger a PPC ad) from 64% to 51% of searches.

There are a number of possible reasons for this, including:

• A reduction in advertisers due to the current economic situation
• Google using the Quality Score to improve user experience by stopping advertisers bidding on irrelevant keywords just to get cheap traffic
• An increase in the number of words per search query making PPC campaigns have less coverage

This last theory is interesting because it can be fixed by a decent PPC manager. Most campaigns limit the use of broad match keywords because they are more expensive and rely on exact match and phrase match instead. However if searchers are entering more words per query and ad groups are expanded to have more exact match terms they can very quickly become large and unmanageable.

On the other hand just turning on broad match to catch a large variation in queries is likely to be less cost effective.

One conclusion we can draw from all this is that PPC campaigns need very careful management to increase ad coverage while keeping costs under control.

The most important take away however is that companies need to start spending a similar amount on organic search as they do on paid search.

Post category: PPC, Search Engine Optimisation Tweet

Patrick Altoft is Director of Search at Branded3, a Leeds SEO & Digital Agency specialising in SEO, Web Design, Development & Social Media.