Paid ads vs organic traffic

25 October, 2017

What can one say that hasn’t been already saying in the good ol’ paid ads vs. organic traffic debate?

Perhaps that Paid is like renting, and Organic is like owning your lead generation. 

(Cheers, Deepak Pandey, you beat me to it by a year.)

paid ads vs organic traffic 5 (1)

Almost every blog or white paper I’ve read on the subject ends like this: marketers should do both.

And I agree, but up to a point. Paid traffic isn’t for everyone. Saying you need to do both misses the point.

We’re really talking about how to own your lead generation: marketing asset vs. marketing expense.

Paid Ads prices are always going up.

Hanapin Marketing’s 2015-2016 State of PPC report shows Adwords budgets will grow 75% in the next 12 months.

Meanwhile, Marketing Sherpa's Search Marketing Benchmark Report – PPC Edition shows online marketers use paid ads to:

  • Increase web traffic – 63%
  • Generate more leads – 62%
  • Increase online sales revenue – 57%
  • Achieve or increase measurable ROI – 50%

EMarketer reports Google will make $73.8 billion in net digital ad sales in 2017, a 33% market share in the midst of all this. Facebook is a distant second at $36 billion.

(Fortune magazine says the global $224 billion online advertising industry is a duopoly, but that’s another matter.)

People are spending big bucks on paid ads. But I wonder who really benefits when:

  • The cost of digital advertising is rising 5x faster than inflation in the US and 71% faster than the cost of TV ads (Adobe Digital Insights)
  • 70-80% of users ignore paid ads and focus on organic results (Search Engine Land)
  • Organic search drives 51% of all visitors to B2B and B2C websites, trumping all other non-organic search channels, including paid (10%) and social (5%) (BrightEdge)

Like this guy below said: am I taking crazy pills here?

paid ads vs organic traffic 6

I’m not saying paid ads are the devil. What I’m saying is that the AdWords auction system is working extremely well for Mr. Google.

Search Engine Land reports branded-search costs have increased since Google's right-hand rail update in early 2016.

(Before the switch, researchers used heat maps and found searchers' eyes focused on the top organic results, barely noticing the ads to the right.

Now we get four ads over our organic search results, right where the action is. Smart Google, brilliant.)

paid ads vs organic traffic 7

But I digress.

WordStream conducted an exhaustive Google Adwords cost analysis, which showed:

  • The average cost per click in Google AdWords is between $1 and $2 on the search network. On the other hand, the average CPC on the Display Network is under $1.
  • The most expensive keywords in AdWords and Bing Ads cost $50 or more per click.
  • Giant retailers can spend up to $50 million per year on paid search in AdWords.
  • The average small business using AdWords spends between $9,000 and $10,000 per month on their Google paid search campaigns. That's $100,000 to $120,000 per year.

If you’re spending $50 million on Adwords and your top competitor ups their bid to kick you out of the search results, you have a bloody bidding war on your hands.

If you’re an average small business and your budget is tight, it’s not scalable. A 50 cent increase in price can throw your entire strategy out the window.

With Adwods, you always need to outbid your competition
and your landlord –Google– is in control

Many factors are pushing AdWords Prices up. Keyword competition, customer lifetime value, views, impressions, clicks, bidding strategy, etc.

But the bottom line is this: you always need to outbid your competition, and your landlord –Google– is the one in control.

The price always goes up, so you’re forced to either up your bid or find cheaper keywords, which don’t necessarily rank as well as the ones you already use.

Hence, paid traffic is like renting your lead generation.

But let’s talk about owning your lead gen at a comparatively much, much lower price.

When it makes sense to spend in Adwords –and when it doesn’t

I think comparing paid to organic misses the point, really. What we really should be considering is which one of these two channels:

  • It brings me more quality traffic, i.e., qualified leads
  • Has the highest lead to client conversion rate
  • Has the lowest cost per lead over time

Online qualified lead generation is a numbers game. We all know the statistic: the average conversion rate is around 2%, which is considered good.

This means bringing 100 visitors to my business/website to get two clients. The thing is, not all visitors and conversions are created equal.

Three things influence the conversion rate of a paid ad:

  • Transaction type (B2C vs. B2B)
  • What stage of the funnel that visitor is in
  • Relevance

If you want to create awareness and quick conversions, Adwords does make sense to attract B2C BOFU traffic.

Let’s imagine you wake up with a monster craving for schezwan sauce (also known as schezchuan sauce). So, of course, the first thing you’d do is google "schezwan sauce recipe.”

Now, let’s say you get two ads at the top of your results (these are mockups, domain names are made up):

  • Find the best schezwan recipe at FoodBlog.com - try our recipe finder
    https://www.thefoodblog.com
  • All the ingredients you need to make schezwan - 50% off right now
    https://www.oursupermarket.com

I don’t know about you, but I’d click on the bottom one. It’s more relevant: it’s useful and gets me what I want, whereas the top one is brand-centered.

Just look at the image below, courtesy of Marketing Sherpa. The first one is about your product. The second one is about me –the consumer.

Paid ads vs organic traffic: paid is like renting and organic is like owning your lead generation

So think about it: if your paid ads aren’t converting, maybe it’s because of relevance –what’s important to the consumer.

Search is the #1 driver of traffic to content sites, beating social media by more than 300%.

(This is why innovative supermarket chains are turning their website into a sales tool, i.e., a food blog: Trader Joe’s is a great example.)

In this hypothetical case, I know what I want and go to the guy who can give it to me first or at the best price. So far, so good.

But some B2C transactions require some research. Here is a real-life example I found.

Paid ads vs organic traffic: paid is like renting and organic is like owning your lead generation

Out of four ads, only one is relevant: the second one. It’s more detailed and points to value.

Paid ads are critical for advertisers because they account for 64.6% of clicks when searching online to purchase something using high intent keywords.

But I’m not ready to make a decision yet. I need to see what’s out there first. I need to compare.

So naturally, I click on the second organic result, which really answers what I asked Google in the first place.

But my real problem is the first ad. It’s there because I used the word “photography” –a high intent keyword. But it has nothing to do with my search.

So why is this company wasting advertising money on me?

What about B2B?

The reality is that 71% of B2B researchers start their research with a generic search. What’s more, nearly half are millennials, not in the c-suite, influencing purchase decisions.

And B2B buying decisions are research-intensive. Salesforce says it takes 6 to 8 touches to generate a viable sales lead. Leads, not clients.

This means no paid ad will influence my buying decision after six or eight touches with a potential provider. I will very likely be off Google by then.

And If I go back, it means I’m at the top of the funnel again, looking for something else.

SEO leads have a 14.6% close rate, while outbound
leads have a close rate of only 1.7% (Imforza)

So why is your ad following me everywhere? Why am I still seeing ads for schezwan sauce or Nikon cameras? If my mom borrows my work computer and sees your ad, will she buy your product?

Looking at it this way, it’s no wonder why SEO leads have a 14.6% close rate (i.e., better qualified), while outbound leads (such as direct mail or print advertising) have a close rate of only 1.7%.

As an online outbound channel, Adwords is like a street billboard on your computer screen. Meanwhile, Business Insider reports adblocker usage was up 30% in 2017.

So why are some companies still spending money on stuff no one wants to see?

What is Google?

This is an interesting question. I like to think of Google as an oracle that answers my questions –with a classifieds/billboard section.

And it’s a relevant one because Google may know where you are (your URL) and what you’re searching for, but it doesn’t really know who you are or what you want –yet.

Google Analytics can tell you where your traffic is coming from, but it doesn’t tell you who’s actually clicking on your ads. The only way to tell is to capture data on a landing page. 

Are you a retailer looking for **short-term** conversions, testing,
and/or product sales? PPC is the way to go. 
But if you’re not a retailer, PPC probably isn’t for you.

As the folks over at Kapost say, at the end of the day, “PPC campaigns and SEO campaigns drive different kinds of traffic to your website. Which way you lean depends on what your traffic goals are.”

Do you want **short-term** conversions, testing, and/or product sales? Then, PPC is the way to go.

50% of people arriving at a retailer’s site from paid ads are more likely to buy than visitors who came from an organic link.

But if you’re not a retailer, PPC probably isn’t for you.

Also, the quality of leads generated via either channel can vary significantly because of your keyword strategy.

If you aren’t generating many leads, make sure you’re using **relevant topics** in your content and paid ads. You gotta know your audience. 

SEO delivers a lower Cost Per Lead than any other
paid advertising platform currently available

It’s in your business’s interest: SEO delivers a lower Cost Per Lead than any other paid advertising platform currently available.

So the real question is: am I paying for leads I could acquire organically?

Before I go, I’d like to share with you a fascinating real-world case that beautifully highlights why paid is like renting and organic is like owning your lead generation.

Marketing assets vs. marketing expense

At IDS Growth Agency, we’ve been working for a mass-market, non-retail client in Chile for a little over a year.

We ran an eight-month experiment to boost lead generation. And, boy, do things get interesting when comparing the Client Acquisition Cost of paid ads vs. the Client Acquisition Cost of organic traffic.

Contrary to our advice, the client spent 76 million CLP (a little over $126k) on Facebook and Adwords to acquire 115 clients.

That’s a CAC of $1,146 on Adwords and $192 on Facebook.

Paid ads vs organic traffic: paid is like renting and organic is like owning your lead generation

Paid ads vs organic traffic: paid is like renting and organic is like owning your lead generation

However, when you look at our client’s Organic Traffic Lead to Client Conversion and Organic Traffic CAC, the spend plummets to 17,359 CLP (just $27.4) for more than 1,6k clients.

Organic CAC

So the takeaway is organic CAC 41x cheaper than Adwords and 7x cheaper than Facebook ads for this client. Owning is clearly cheaper.

Conclusion

I’m no marketing guru and certainly don’t want to get on Mr. G’s bad side here.

However, I do think many non-retail companies are wasting much money on Adwords. Having said that, I don’t recommend you quit paid cold turkey if it’s your only or main lead gen source.

The key to getting good quality leads is answering the questions they ask Google. That’s something no ad can do. So start creating quality content and reduce your paid traffic spend as it starts indexing.

What I’m saying is: use Google to the advantage of your business, not Google’s. Organic belongs to you, and it’s cheap. Ads belong to Google, and they’re getting more expensive.

The key to quality leads is answering the questions they ask Google. That’s something no ad can do. 

That’s the difference between owning and renting your lead generation. That’s the difference between a marketing asset and a marketing expense.

(If spending on paid ads you must, do it where it counts. Here are 28 sources of paid traffic with high ROI.)

Renzo Dasso

Renzo Dasso

I help companies generate demand, improve conversion rates and grow referrals channel with the Inbound system.

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