Monday, March 20, 2006

Does PPC Cannibalize SEO? Not Likely In The Real World

Gary Angel, CEO of SEMPhonic wrote a great article on the interplay of organic and paid search listings the other day for iMediaConnection, and Marshall Sponder of WebMetricsGuru had an equally good review of Gary's article; I highly recommend you take the time to read Marshall's article, and then Gary's if you feel like it.

Taking data from one of his F1000 advertiser's PPC and SEO campaigns, Gary infers that

"if your SEM provider isn't accounting for organic cannibalization and you have a significant natural presence, then chances are they are seriously mis-optimizing your campaign. Indeed, it seems likely that the worst possible scenario would be to use an automated PPC management tool that isn't taking account of organic cannibalization. Such a system would be particularly efficient at steering dollars into terms whose apparent (but not real) incremental cost is artificially lowered by organic cannibalization."

At first pass, I think many in the search industry would look at his data and agree with him. But in my opinion, however, a couple points are worth considering:

1)Unless I misread Gary's article, the data is mainly for brand keywords. And unless your PPC/SEO campaigns exist only to ensure people find you who don't know the difference between the browser address bar and a search engine, then a study of this type must consider more than just brand keywords to have any relevance.

2)Most advertisers I know have thousands to tens of thousands of keywords in their paid search campaigns, with average bid positions of ~5.0 and average organic rankings of ~15. In that more real scenario, I'll bet two dollars to your penny that the cannibalization Gary speaks of is less like 20-50% and more like <2%.

3)Paid search traffic varies to a much lesser extent than organic traffic, as victims of Florida, Allegra, Bourbon and other SERP updates can attest. Yet, advertisers' traffic and ROI needs tend to move in one direction - up and to the right. In a world where advertisers' marketing goals are set by...themselves, I have yet to meet the advertiser who cares more about avoiding unnecessary cost than achieving his/her goals in a predictable fashion.

7 Comments:

Blogger matt mcmahon said...

Hi Chris, Great post. I know the client that Gary is referring to very well and read the original analysis. The challenge is that the analysis assumes every marketer's objective is purely to get the lowest direct, cost per acquisition. In most cases, Marketers goals are much more complex and need to balance efficiency with growth of market share. Re-analyze the numbers and notice how much market share the client loses by not having placement in both - they could increase their market share by 49% aligning both paid and natural. Foregoing market share might be OK for a small business but not acceptable for a Fortune 1000 company in a competitive space with new and larger competitors coming into the market.

SEO is a practice that should be folded into the overall marketing mix much in the same way planners are doing so with paid search. Alignment, instead of competition, between media channels is what a Fortune 100 advertisers needs to be successful.

Matt McMahon

7:42 AM

 
Blogger Gary Angel said...

I don't necessarily disagree with either of these comments - but I have a couple of additional observations. First, it's true that for many programs organic cannibalization won't be much of an issue - we see lot's of programs where their organic placement is routinely so poor that there really isn't much chance of any effect. In addition, we've measured this for multiple clients and have found very different degrees of effect - including one case where there was actually a positive effect to running paid ads. However, many of our clients are very large companies and they do have significant organic presence - so it's very important that they pay attention to this issue. And while this client was heavy into branded terms, we've measured similar impacts with non-branded terms provided that the organic position was quite high. Regarding Matt's post, I think the incremental volume is important - and I think our study makes it clear that there is incremental volume. But there are lots of ways to get incremental volume - there are always other words to buy or additional rotations. To suggest that big companies won't ever sacrifice incremental volume is simply not true. So the real issue is what is the cost of the search term actually is. As I hope the article made clear, that can't be measured unless you know what the organic cannibalization is.

3:36 PM

 
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