The Upside-Down Economics of Enterprise Search Budgets

Where does the money go?

Let's begin with a bird's-eye perspective of the scenery. The good news is that digital marketing channels are receiving more marketing spend than ever before: 44 percent of current marketing budgets, according to a study of CMOs.

So you manage an enterprise company's digital marketing budget, and it's time to allocate funds to PPC and SEO. You recognise the benefits of SEO, and your current SEO team is comprised of rock stars. But you're a data person, and you can't deny the immediacy of PPC. So you allocate nearly all of your budget to PPC in order for your firm to gain from instant revenue. Then your organisation becomes accustomed to such revenue. And suddenly, consistent revenue (and the underlying marketing vehicle) isn't an option; it's a requirement.

Then something happens that necessitates a faster return. Maybe your organisation had a few of terrible months, or maybe you just need a bit more income to meet your Q4 targets. As a result, you allocate more funds to PPC. Your budget becomes accustomed to the revenue (once more), and the cycle continues. Before you realise it, you've spent a disproportionate amount of your search budget on PPC, with little left over for SEO.

Does this sound familiar? Then you've joined a perilous environment with a slew of other stranded businesses. This world is known as the Upside Down. In the Upside Down, search budgets are disastrously skewed, and businesses are forced to feed a machine that simply will not be satisfied. If you dare, explore this realm with us, and we'll show you why it happens and how to break free.

Key Points

  • Because PPC promises fast returns, many businesses allow it to consume their search budget.
  • However, PPC is costly, needs daily labour, and results in increased acquisition expenses.
  • With a significant SEO spend, you'll obtain a greater overall ROI due to ad blindness and low click-through rates associated with PPC ads and low acquisition costs and compounding returns associated with SEO.
  • SEO is also more scalable than PPC for businesses and allows for presence on high-paying keyword.
  • Rebalancing your search budget is about being more strategic and prioritising for maximum long-term business performance, not just cutting back on PPC expenditure and reallocating dollars to SEO.

However, the "digital marketing" segment of the pie encompasses a wide range of activities, including social media, video marketing, display advertising, PPC, email marketing, content marketing, and SEO. And marketers can occasionally split the pie in ways that don't always make the most financial sense for the company.

PPC is at the top of the list of offenders. Because of its fast return, paid advertising frequently consumes budgets from high-value channels such as content marketing and SEO. This establishes a symbiotic relationship between sponsored search and your marketing spend. Why divert capital and jeopardise a dependable source of quick revenue?

As a result, you're continually tempted to increase your PPC spending in order to see faster results. That is the voice of the Upside Down.

Why are search budgets inverted?

According to a 2019 report, businesses earn $2 for every $1 spent on Google Ads. It appears to be a no-brainer, doesn't it? Of course, if you had a machine that gave you $2 for every $1 you put in, you'd use it all the time!

However, this is where insufficient data can be our biggest enemy. Pay close attention to that number, since it will appear frequently as we explore the Upside Down. In fact, it may have given rise to the Upside Down.

Paid search is costly.

Let's stick with the $2 for $1 machine for now. Your organisation must produce money, and the machine provides a dependable, near-immediate means of doing so. But keep in mind that businesses make $2 for every $1 spent on Google Ads, not for every $1 spent on PPC in general. Because PPC campaigns require time and ongoing administration by a team of professionals, any ROI calculation must account for your human resources, software, and infrastructure expenditures.

Furthermore, for a PPC campaign to function well, conversion-friendly landing pages must frequently be designed from scratch. This necessitates enlisting the assistance of extra teams such as content and web development.

This adds up to a significant amount of money spent on PPC. That doesn't even take into account the opportunity cost of diverting funds away from other revenue-generating activities.

So you're in front of this machine, thinking you simply have to spend $1. But then you read the small print:

You must additionally pay an additional 70 or 80 cents per click for your PPC management staff, web development, SEO copywriting, software stack, and other relevant fees.

So, in actuality, the PPC machine is asking you to pay far less than $2. You have a lower profit margin than you anticipated, yet you still come out ahead. So you keep going.

Paid search yields no benefits.

Assume you purchased a dividend-paying investment. Now, you get a dividend distribution multiple times a year, every year, for the rest of your life - even if the stock isn't performing well.

Investing in PPC is similar to investing in a company that pays no dividends. Sure, someone may click on your ad and provide you with an immediate return. But that's all you get — your PPC investment will never be useful again.

It's good to have an instant return. However, because it does not pay dividends, you must continue to put money in to get money back, which dramatically reduces your profit margin.

You wouldn't put all of your money into a stock that doesn't pay dividends, so why would you put all of your search budget into PPC when there's another option that can offer a return again and time again (and time and time get the picture).

Paid search does not encompass the entire conversion funnel.

One of the reasons PPC generates consistent revenue is that it often targets the most conversion-friendly segment of your audience. The conversion funnel has three stages: awareness, deliberation, and decision. All three phases are valuable, with the awareness phase representing your most diverse pool of potential clients.

During the awareness phase, you have a key opportunity to bring in new clients and establish the type of brand recognition that leads to widespread popularity and loyalty. However, because you are only introducing customers to the funnel at that time, not everyone will be interested in purchasing. Even if they are interested, they may not be prepared. As a result, while this phase has fewer conversions than the decision phase, it is no less significant.

It makes no sense to invest your Google Ads budget on a content strategy that fails to convert (unless your objective is expanded reach and your budget is large enough to accommodate this). Conversions are most likely a high priority in your PPC campaign. That is, throughout the choice step, you will fine-tune it for the most conversion-friendly phrases. As a result, you'll leave the critical stages of awareness and consideration in the dark.

The expenses of paid search acquisition are significant.

Because PPC is so costly, it has a high Cost Per Acquisition (CPA). CPA is a metric that evaluates how much money your company spends to gain customers. Simply compute your CPA if you think your CPC was too high. Your CPA will be much higher because not everyone who clicks converts once they get at your site.

You may be wondering how high your CPA may go. According to WordStream, the typical CPA for Google Ads is between $50 and $60. However, this is the average, implying that CPA is frequently greater than $50. Sometimes much higher.

If you're a law practise that can generate thousands or millions of dollars from a single convert, then $100+ CPA might not be such a terrible deal.

But what if you're selling shoes for $200? You're barely making ends meet.

A paid search necessitates daily labour.

Paid search initiatives necessitate the involvement of a team of professionals. Those experts will require a significant amount of time to construct and fine-tune the campaign. And fine-tuning incurs a daily labour cost. Even if you've been running PPC or other sponsored search campaigns for a while, you can't "set and forget." Because competing bids and the competitive landscape change on a regular basis, you must modify and optimise accordingly.

You won't know where or when these changes will occur, but you will know one thing: failing to recognise a trend or catch an issue when it occurs will drain your budget until you do. So the only solution is to monitor the campaign on a daily basis, monitoring the horizon for potential risks and changing direction if necessary.

Opportunity squandered: banner blindness

According to Nielsen Norman Group eye-tracking tests, when individuals browse multiple search results, they overlook the advertising at the top of the SERPs. This is due to a phenomenon known as banner blindness, which has resulted from years of being bombarded with advertisements. When individuals are browsing for content or comparing prices, they know that the organic results will be the most useful source of information. That content is considerably more likely to be objective and valuable, rather than crafted to promote a product.

With PPC, you miss out on the ability to reach the vast majority of your potential audience who would prefer read useful content than click on an ad.

Unrealized potential: SERP click-through rates

How much does banner blindness affect the average SERP user? We can address this question in part by examining click-through rates (CTR). According to a WordStream survey, the average click-through rate for PPC advertising across industries is 3.17 percent. Advanced Web Ranking discovered that the average CTR for Google page one organic keyword is 77.2 percent desktop and 64.9 percent mobile. According to a Jumpshot and Moz study, organic listings generate 20X more clicks than PPC advertisements.

That astounding disparity is even more astonishing when you consider that PPC advertising are more likely to target those low-funnel, purchase-ready keywords. Even when a PPC ad shows exactly what a high-intent consumer is looking for, they don't click!

SEO yields a higher ROI

Now that we've gained a better knowledge of the benefits and pitfalls of sponsored search advertising, let's turn our attention to the ROI of SEO. SEO budgets on the Upside Down are typically substantially smaller. Why? Because obtaining Google page one results is more difficult. And because nothing happens right away when they put $1.

This one, like our PPC machine, requires effort. Long-term labour is likewise required for the best results — but there is a critical distinction. Your PPC machine only returns money when you invest money into it and create daily campaign visitors.

It's true that the more you put into the SEO machine, the more you'll receive out. But you do that continual labour to maximise your results, not because the revenue metre stops when you stop. If you stop, the machine will continue to hum in the long run, rewarding prior efforts with brand exposure and money.

Those high organic click-through rates we mentioned previously in the SERPs? They have the ability to reach a considerably wider and more diverse audience than PPC's slice. The SEO audience consists of all three stages of the purchasing process, as well as new customers and prospects who can create a favourable relationship with your business over time. The marketing ROI from this massive audience may arrive gradually, but it is significantly larger. And if you apply that information correctly, it will be your ticket out of the Upside Down.

Additional Materials

Marketing ROI: Defining, Measuring, and Improving Your ROMI


SEO ROI: How to Determine the Worth of Your SEO Investment


Which Has a Better ROI: SEO or PPC?


ToFu (top-of-funnel) value

In terms of the funnel, increasing traffic at the top of the funnel with SEO is a good way to set yourself up for future business. You may be producing thousands of top-of-funnel (ToFu) clicks without an immediate conversion today, but you're preparing your brand for a lot of conversion success in the future. And, with SEO, you can do it 24 hours a day, seven days a week, increasing your overall ROI.

SEO results accumulate over time

Because of how the two work, many businesses devote the majority of their search budget to PPC while underinvesting in SEO. You get $2 back when you deposit a dollar into the PPC machine. Nothing happens right away when you invest in a business SEO strategy. So you feed it another $1 the next day, and...nothing occurs. This will continue for a while until you start seeing 50 cents, then $1, then $2, then $3, $4, and $5.

And then it'll just keep going. Even if you never spend another dollar on that optimised page or content push again, the return will continue as long as the page appears in the SERPs and the material is valuable to the searcher.

People are impatient, which is why marketers get stuck on the numbers here. They expect rapid results to demonstrate the value of their effort and to include in weekly and monthly reports. Their superiors want results today, this week, and this month, not this year and next year, even if the long-term returns are larger in scale and cost a fraction of the acquisition cost. In other words, while an investment in SEO is more strategic and has a higher potential influence on the business, many marketers get caught up in short-term thinking.

It's similar to manufacturing an automobile. It takes a lot of effort to design the car, make all of the parts, and set up the manufacturing line. It takes some time. However, if the infrastructure is in place, it is possible to produce millions upon millions of cars for the market. Sure, you may add a new colour or function here and there, but the initial investment has had a flywheel effect on the returns you'll receive.

SEO allows for visibility on high-paying keywords.

Some keywords will be prohibitively expensive to bid on in sponsored search. If a keyword's CPC is $25, $50, or greater, you'll have little alternative but to withdraw your brand from the auction when the ROI is no longer there.

Then there's SEO. The difficulty of a specific term, not its cost, is the barrier to entry in SEO. The difficulty issue can be addressed with technical SEO, relevant and useful content, and targeted outreach. As a result, SEO is the ideal place to find high-value, high-CPC keywords that are simply impossible through PPC. Furthermore, because the additional labour creates site authority and relevance for the phrase, you may see the keyword's CPC reduce over time on the PPC end if quality scores improve.

SEO is more adaptable.

Finally, there's the issue of scalability. This is a huge issue for businesses that serve millions of clients and employ hundreds or thousands of people. Enterprise websites, on its own, might have thousands of pages. That means your systems must be efficient enough to satisfy your needs while also being adaptable enough to expand with your organisation. And, in that regard, SEO triumphs.

This is primarily due to the compounding effect of SEO's ROI against PPC's pay-to-play nature. It's also because SEO is inextricably linked to so many other aspects of your marketing: content, public relations, social media, user experience, design, and development. The mechanisms you create in any of these areas can interact with and reinforce one another. And the advantages you notice in one area can have a direct impact on the others.

This allows you to integrate your SEO strategy into the core of your marketing rather than managing it as a distinct arm. As a result, you'll be able to scale your SEO in tandem with the growth of your marketing business.

Rebalancing Your Search Budget

We're not arguing that if you're stranded in the Upside Down, you should stop utilising the PPC machine and start using the SEO machine entirely. Because PPC generates constant money, discontinuing it might be disastrous.

The Upside Down refers to a spending cycle in which you require more quick cash, so you redirect more of your digital marketing budget to PPC. The increased revenue becomes the new norm, and you never redirect the funds to your other digital strategies. Then there's a slump, a promotion, or a Q4 deadline, and you need more quick money, and the cycle repeats again.

So rebalancing your budget is about more than just reducing your PPC expenditure; it's about breaking the cycle and building a better search portfolio that provides considerably larger business outcomes over time.

You can accomplish this by allocating a growing portion of your search budget to SEO. Spend a substantial amount of your increased earnings on SEO as your business grows and your marketing budget expands.

Continue in this manner, and before you know it, you'll be out of the Upside Down and breathing in the fresh air of long-term, self-sustaining, consistently increasing revenue. We assure that everything will be OK on the other side.