How to split your budget between SEO and PPC [Case Study]

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Today’s post comes from PPC Hero Ally Aleh Barysevich. Aleh is Marketing Director at Link-Assistant.com, the maker of SEO and social media software. The company’s flagship products include SEO PowerSuite and BuzzBundle. You can catch him on his Google+ here.

 

How do you decide on splitting the budget between SEO and PPC? It’s not rare that some site owners have fixed shares for each component, although that might be worth revising.

 

Depending on the niche, PPC costs might be too high and not worth paying, whereas doing SEO might be an easy win. It may be the other way round also.

 

Whichever the case is, it’s worth knowing costs for both organic and paid traffic.

 

In this post, you’ll find how exactly you can calculate the cost of 1 Visit brought by SEO and PPC.

 

We’ll first describe the methodology and then provide an example.

 

The methodology

 

Here’s the experiment in a nutshell.

 

To evaluate organic costs, we’ll need the following entry-level data sets:

 

(1)   An estimate of the SEO budget. This will depend on what your site is currently up to and your SEO skills.

 

One of the possible scenarios might be that you’ve just built your site and it’s perfect from on page, structure, design, content and social interaction stand point. What it lacks is backlinks, however you have neither time nor expertise to handle link building yourself. So you hire an SEO agency that works out a link building plan for you. With competitors in mind, you’ll have an approximate (!) time frame when link building will drive you to top 10 of search results. The agency’s rate and the assumed time will give you an estimate of the SEO budget you need.

 

(2)   the estimated traffic you’ll get if ranking # 1 for this keyword in SERPs

 

This data and the majority of other data we’ll be using as part of this experiment is available in Rank Tracker. The data column is called Expected Visits in Rank Tracker. It is not default in SEO & PPC Analysis module, so make sure you add it to visible columns.

 

PPC vs SEO 1

 

To evaluate PPC costs, we need 3 entry-level metrics:

 

(1)   cost-per-click (CPC)

 

We’ll need approximate CPC that estimates the amount that you might pay each time someone clicks your ad. You can find CPC data in Google AdWords Keyword Tool and in Rank Tracker.

 

(2)   Estimated PPC cost per month

 

This one is available in Rank Tracker (SEO & PPC Analysis module) and is calculated using the formula:

 

Estimated PPC cost/month = CPC * # of Searches * Average PPC CTR,

 

where Average PPC CTR is set equal to 0.07 (the assumption is that an average ad is clicked in 7% of cases).

 

(3)   the estimated traffic you’ll get if ranking # 1 for this keyword in paid search: Clicks for a given CPC in Google AdWords Traffic Estimator

 

PPC vs Seo 2

 

Clicks and the Estimated PPC cost per month will give us the cost of 1 Visit through PPC. Please note that Google AdWords Traffic Estimator suggests Clicks per day, thus if your calculations are per month, you’ll need multiplying that by 30.

 

The diagram below summarizes the methodology:

 

image3

 

The case study

 

Keyword: last minute hotel deals

 

(1)   The estimated traffic you’ll get if ranking # 1 for this keyword in SERPs: 35,400

 

This data is available in Rank Tracker, just make sure you add Expected Visits to visible columns:

 

PPC vs SEO 4

 

(2)   The approximate SEO budget

 

Let’s say you hire an SEO pro, who charges $1,000 per month and estimates that it’ll take them about 6 months to make your site visible in search results for “last minute hotel deals”. We can imagine how weird a promise to rank in Google top 10 may sound, but the point here is finding a measurable metric to evaluate SEO costs.

 

Thus, the SEO budget will make $6,000.

 

This SEO budget will ensure 35,400 Visits per month, which makes 424,800 Visits per year. Thus, the cost of 1 organic Visit is $6,000/424,800  = $0.014.

 

Paid search:

(1) CPC for “last minute hotel deals” is $2.58

 

(2) Estimated PPC cost/mo: $10,926.3

 

Both metrics can be found in Rank Tracker’s SEO & PPC Analysis Module.

 

(3) Expected Visits:

 

According to Google AdWords Traffic Estimator, there’ll be approximately 42 Visits a day, i.e. 1,260 Visits a month.

 

PPC vs SEO 5

 

This makes the cost of 1 paid Visit $8.67.

 

Experiment summary

 

Keyword: last minute hotel deals

 

1 organic Visit cost: $0.014

 

1 paid Visit cost: $8.67

 

Takeaway 1: Does bringing Visits at this price make sense?

With cost per Visit data on the table, the first thing you should do is decide if you can afford bringing traffic at this cost at all.

 

To do that, compare both costs per Visits to Revenue per Visit:

 

Revenue per Visit = Revenue per month / Number of Visits per month

 

For example, your Revenue per Visit is $4, which means you can’t afford PPC at $8.67 per Visit, at least before you optimize your conversions.

 

If PPC still makes sense, read on.

 

Takeaway 2: Splitting the budget between SEO and PPC

 

1 organic Visit is 99% cheaper than 1 paid Visit under the chosen assumptions. Thus, getting on top in SERPs is a much easier attainable goal compared to being #1 in the paid search results, and a webmaster competing for “last minute hotel deals” should start with getting the site to the Google top organically.

 

Depending on your web promotion budget, the SEO share might be dominant during this “start-up phase”.

 

For example, your web promotion budget is $3,000/mo and you decide getting the highest you can in SERPs during the first 6 months.  Thus, if your SEO cost per month is $1,000 (as in the case study above) and you pursue high organic rankings, your budget will be split 33% SEO: 67% PPC during the first six months.

 

Please note there’s no contradiction in SEO being the top priority and the SEO share being only 33%. The reason for that are the SEO agency rate ($1,000) and the total web optimization budget ($3,000).

 

When the start-up phase ends and the site is ranking on top for your keyword, I would go towards a bigger share on PPC, e.g. 17% SEO : 83% PPC. Here’s why I would split the budget that way: you’ll still need some link building follow-up, and half-rated $500 plan from your SEO company would be perfect. And you can feel free to spend the remaining part, $2,500, on PPC.

Run your own experiment

 

The strategy suggested above can be applied to any site. Just follow the steps and let me know if you have any questions in the comments below. Also I’d be curious to know how you split your web promotion budget between SEO and PPC.

 

ACO_endad_Knockout

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  • Anton

    Why organic traffic 35 400 visits per month, but PPC traffic 1 260 visits per month, it’s seems so amazing!?

    • Aleh Barysevich

      Anton, my guess is that’s because organic top listings normally drive higher CTR than PPC ads.

      • Anton

        Aleh, I don’t think so, because more than 35400/1260=28 times higher! If you say that CTR equal to 7% is it normally for PPC, than CTR for SEO 7%*28=196%! Opps, again very amazing)
        May be my reasoning very bad!?

        • Aleh Barysevich

          Anton, both 35,400 (local monthly searches in Google AdWords Keyword Tool and in Rank Tracker) and 1,260 (estimated monthly PPC traffic according to Google AdWords Traffic Estimator) are just entry-level data sets for a specific keyword. They are not calculated as part of the case study, so there can hardly be 100% solid reasoning for the difference. Thank you for your interest anyway!

  • tony

    Am I missing something? How does the cost of a PPC visit jump from $2.58 (CPC) up to $8.67?

    • Aleh Barysevich

      Tony, I assumed that CPC and cost per a PPC Visit are different things.

      The cost per a PPC Visit equals Estimated PPC cost/mo divided by Expected Visits.

      For “last minute hotel deals”: $10,926.3 / 1,260 = $8.67.

  • mvarga

    Hi Aleh,

    Interesting post but there are some additional things:

    1. Why is 1 year the time frame for SEO clicks. Why not 6 months or even better – first 6 months?
    To be honest, SEO results are very uncertain and therefore my recommendation should be to compare the conversion from organic, assisted PPC, and pure PPC.
    Pure PPC is based on PPC ROI,
    assisted PPC is based on multichannel and attribution funneling and
    organic should have SEO costs + offline and brand advertising costs included.

    2 .The CPC is very different from the calculation and traffic estimator (2,59 vs. 8,67). Any particular reason for that?

    3. What is going on with lost profits during the starting period because of not advertising?

    4. How accurate is data from Rank Tracker?

  • Pedro Martheyn

    one thing to take into consideration is that traffic estimator tools from Google are not always but 95% of the time WAY off actual numbers

    • Aleh Barysevich

      Hi Pedro, that’s an important addition as well. Any entry-level data in my experiment is off in some way, but my point was in finding measurable metrics. Google AdWords Traffic Estimator appears to be the only data source that meets 2 crucial criteria:

      1) it comes from a de-factor standard provider

      2) it is available to every online marketer

      What data source do you suggest?