SEO vs. PPC

Running head: EFFECTS OF SEARCH ENGINE MARKETING 1

Search Engine Optimization vs. Pay-Per-Click Search Engine Optimization vs. Pay-Per-Click

By

Aliah M. Thomas

Texas A & M University, Commerce

SEO vs. PPC: Effects of Search Engine Marketing 2

The Internet has made it possible to take the contents and services of businesses in all

industries and sizes alike, to every corner of the world, enabling them the ability to achieve an

unprecedented amount of potential customers (Espadas, 2008, p.1727). According to

Internetworldstats.com, approximately 1.96 billion people around the world now have access to

the Internet. With 28.7% of the world’s population now going online for their information,

search engines have inevitably become increasingly popular. A study conducted by

SearchEnginewatch.com reveals that there were more than 131 billion searches conducted world-

wide in 2009. This number represents more than 4 billion searches per day, 175 million per hour,

and 29 million per minute. However, although a search engine may return millions of results for

each user query, users only looks at a select few. In fact, 73% of search engine user’s never look

beyond the first page of returned results (Jansen & Sprink, 2006).

In today’s technology-savvy world, consumers are spending far less time and attention on

traditional forms of media. Instead these consumers are now “Googling” online (Kumar, 2007,

p.3). Google, the undoubted leader in global search market is estimated to conduct more than 91

millions searches each day. This constitutes for almost 60% of all Web search that’s conducted

online. Given that a top position could potentially lead to tens-of-thousands of new prospects, for

most online businesses today, Google is the preferred search engine of choice.

Given its immense growth and popularity within recent years, the Internet has become an

increasing competitive market. There are easily hundreds or thousands of relevant pages

available on the Web (Avrachenkov & Litvak, 2006, p.319) that compete everyday against others

with the same or similar content, information, and even quality design (Espadas, 2008, p.1727).


If businesses online want to be able to effectively compete in the online market, they need to

found before their competitors.

“Search Engine Marketing or SEM is essentially the utilization of search engines as a

marketing tool for a business.” (Mamaghani, 2009, p.131) Because Search Engine Marketing

allows even small companies with limited capital to compete for a strong position in the online

marketplace SEM has become one the most popular forms of online marketing today. Search

Engine Marketing accounted for at $14.7 billion dollars in revenue generated in 2009. According

to SEMPO 2008, this expenditure is forecasted to nearly double by 2013.

Effective SEM strategies, such as Search Engine Optimization (SEO) and Pay-Per-Click

(PPC) essentially enable business websites to “be found” easier by users searching for related

products and services. Both Internet marketing strategies are designed to generate web traffic by

increasing a website’s visibility in the search engine results pages or SERPs. Google’s SERP is

displayed in two categories: Organic or natural search results, associated with SEO, appear on

the top, left hand side of the user’s screen and are generated by search engine’s proprietary

algorithms. Paid or sponsored results, associated with PPC, appear on the top, right hand side of

the user’s screen and are listed because content providers or advertisers have paid the search

engine companies to place bids on one or more terms in the search query (Ma, Pant, & Sheng,

2010, p.30).

With the increased importance of online advertising, many companies are now shifting

their advertising budgets from the traditional print (newspaper and magazine), direct mail and

television ads, to online marketing campaigns such as Search Engine Optimization and Pay-Per-


Click (Mamaghani, 2009, p.132). However, much skepticism still exists in regards to the impact

these SEM strategies actually have on the bottom line (Mamaghani, 2009, p.136).

It has been estimated that 82% of all online marketing activities go towards paid

placement (PPC) campaigns. The distribution of dollars suggests that Pay-Per-Click is perceived

as the most effective means of achieving increased visibility in the search-results pages (Sen,

2005, p.10). However, research reveals that users are far less likely to select areas in the

sponsored listings. Given the discrepancy, it’s not difficult to see why so many online businesses

remain confused as to which online marketing strategy is most effective. These companies often

wonder, “Should we use Search Engine Optimization as our online marketing strategy?”

The following statements are hypothesized:

1. Website profitability is dependent, in part, on the amount of traffic it

generates. Therefore, it is assumed that as traffic increases, revenue should

increase as well.

2. Search engines are a major traffic driver for websites.

3. Search engine traffic is increased through the use of SEO and PPC.

The purpose of this applied business research paper is to determine the effects of Search

Engine Optimization in comparison to Pay-Per-Click. Essentially, both Internet marketing

strategies have become increasingly popular as highly effective methods for improving search

engine rankings and generating new web traffic. However, this paper will provide insight as to

which SEM strategy is most effective, in terms of its ability to generate web traffic. The

conclusions derived will be based on the accumulation of data collected and analyzed from


[thirty] recently published, peer-reviewed journal articles. In efforts to ensure consistency

amongst the comparisons within the literature, Google will be the only search engine of focus.

Google’s SERP has 5 sections:

1. Top Sponsored Links-- The top ranking “sponsored” website

2. Side Sponsored Link-- The remaining “sponsored” website listings

3. Optional Information Feeds-- i.e. News and Froogle listings

4. Above the Fold Organic-- Viewable, top ranking organic search results

5. Below the Fold Organic-- Organic search results, viewable after scrolling

It’s critical to understand how Google’s SERP is displayed and viewed by Internet users

that search the web. It is important to note that Top Sponsored Links very seldom show in the

area referenced. This is also true for the Optional Information Feeds. However, in efforts to

ensure objectivity, all potential placement possibilities have been displayed. It is also important


to note that ten organic results are always displayed by Google on the first page of the search.

The number of sponsored results however, will vary with each search query.

DiscussionDiscussion

““Search Engine Optimization (SEO), is a set of techniques that are aimed at improving

the “natural or organic” ranking of a website in search engine listings, thereby making it more

likely that the end user will choose to visit the site.” (Search Engine Optimization, 2006, p.39)

SEO seeks to achieve high ranking in the search engine results for certain search words or

phrases (Malaga, 2009, p. 132). The lesson: a narrower focus generally improves ranking

(Freedman, 2009, p.28). “SEO is very important for companies that conduct business primarily

online, such as e-commerce, commercial portals, and subscription-based news media and

research sites.” (Freedman, 2009) SEO is also important for businesses that use their websites to

generate sales leads (Kumar, 2007, p. 5). For these companies, understanding which factors can

influence a page’s ranking in a search engine is crucial for any web site that wishes to attract

large numbers of users (Evans, 2007, p. 22). In addition, these companies must also have an

understanding of search bots, ranking algorithms, key-word density, and other complexities as

well (Freedman, 2008). SEO involves analyzing and modifying website to enable search engines

to read it, understand it, and index (or catalog) it correctly. These techniques include

manipulation of dozens or even hundreds of website elements such as Meta tags, page content,

and site navigation in order to improve the site in the SERPs (Malaga, 2008). With regards to


Google’s search engine, “Page Rank is one of principle criteria according to which it ranks web

pages.” (Avrachenkov & Litvak, 2006, p.319)

Search Engine Optimization (SEO) is generally considered a very complex and time

consuming process. This is because organic search results are selected and ranked on the basis of

search engine’s proprietary algorithms (Ma, et al., 2010, p. 31). There are over 200 different

factors (or signals) used by Google to calculate a page’s rank (Evans, 2007, p.23). These factors

are intended both to prevent the deliberate manipulation of SERPs as well as to ensure that

Google maintains its ability to return useful, relevant results for user searches (Cahill & Chalut,

2009, p.241). However, the steadily increasing requirements of search engine optimization make

the techniques much harder and arguably more costly to implement. Ultimately, this has lead to

the majority of online business to invest in the quick and easy “fix” for advertising solutions.

Paid search has become the primary business model for web search engines today

(Zhongming, Pant, & Sheng, 2010, p.29). This industry has emerged as a vital pillar for the

success of the major Search Engines—for example, 99 percent of Google’s revenue came from

paid search advertising like Google Adwords (Kumar, 2007, p.8). Paid search accounted for $23

billion for Google alone in 2009. Paid search functions on a “pay-per-click” basis. This means

that with PPC, the site owner only pays when a user actually clicks on the ad and visits the target

site (Malaga, 2007, p.68). While not all clicks may result in sales, the advertiser expects that a

portion of the users who click through the displayed ad will make a purchase of the advertised

product(s) either now or in the future, or that the advertiser will otherwise benefit from the user’s

click (Ozluk & Cholette, 2007, p. 350).


Despite the increasing importance and rising popularity of search engines, attention

pertaining to search engine effectiveness largely centers on the number of clicks generated (Kitts

& LeBlanc, 2004). Click-through-rates (CTR) are the rate at which a search engine user is likely

to click on the published ad (Ozluk & Cholette, 2007, p. 351). In essence, a better positioning

yields a higher Click-Through-Rate (Feldman et al., 2006). In their most recent journal article


(Zhang, Jansen, & Sprink, 2009) discuss this further:

Click-through-rate (CTR) is a commercial metric that is used to measure user satisfaction with the results retrieved by a search engine based on a query submitted by a user. CTR is an important element reflecting the quality and effectiveness of commercial search engine and online advertising (p.557).

Pay-Per-Click (PPC), also referred as Cost-Per-Click (CPC), enables businesses the

ability to achieve maximum exposure, yet still allows them to control and monitor the amount

spent on towards the campaign. To obtain placement within the sponsored results, advertisers

place bids on relevant advertising keywords and/or keyword phrases. The amount of the bids and

other factors (such as how often an ad is clicked) determine where the ad is placed in Google’s

SERP (Malaga, 2009, p.132). Generally, the higher the bid, the higher the advertisement is

displayed in the sponsored list. However, if a keyword is bid upon on by multiple advertisers, the

search engine then holds an instantaneous, automated auction to determine which of the

advertisers is currently bidding on that keyword are allocated advertising slots (Ozluk &

Cholette, 2007, p.350). Google then analyzes the traffic for all advertisers competing for the

same keyword and gives higher positions to the ads that generate more clicks over those who

offer a similar bid price but that generate fewer clicks (Ozluk et al. 2007).

Sponsored links are primarily relevant for transactional searches. (Rose & Levinson,

2004) referred to these transactional searches as information location goals, where searchers are

interested in locating a product or service. Sponsors are primarily interested in obtaining

qualified customers who are interested in transactions, either now or sometime in the future

(Jansen & Resnick, 2006, p.1950). Furthermore, amongst the literature there were generally three

specific incidences in which PPC was consistently effective. The first is if the business is a well-


known, established company (such as Wal-Mart doesn’t) who already has a large number of

loyal customers. Secondly, if the establishment consists mostly of resellers and already are

incurring a loss in profit, due to the depreciation of goods sold as well as the higher cost

associated with middlemen. Finally, a company in which the majority of business is not

conducted online has also proven to be effective (Jansen & Resnick, 2006, p. 1959).

Pay-Per-Click is commonly known to be a much faster way to obtain online visibility.

Generally the advertisement results begin to show up in the SERPs within the just the first week

of activating the campaign. Unlike PPC, one of the drawbacks in utilizing the techniques of SEO

is the considerable amount of time it takes to implement (Malaga, 2009, p. 135). SEO has been

known to take up to 120 days after submission before the initial results become visible (Sen,

2005, p.10). This delayed ranking effect on Google has commonly been referred to as the-

Google sandbox. Because of this, SEO is not looked upon favorably for most businesses

primarily because it makes it particularly difficult for marketers to promote seasonal or “hot”

items that require rapid indexing and ranking (Malaga, 2009, p.134). However, although SEO

takes longer to implement it is important to point out that an optimized site does not drop off the

first results page even when a marketer’s spending slows or stops, as paid search does either.

Paid search companies also tend to offer lower average prices than their organic

competitors (Ma, Pant, & Sheng, p.31). Established according to a bidding, amounts of

10-12$/click for the top premium positions are generally considered the average (Daniela &

Anca, 2009, p.1337). However, organic search engine ranking is known to have a long-term,

sustainable branding impact (Noaman, 2006). Therefore, it can be argued that over time, SEO

will almost always result as the more cost effective. With Pay-Per-Click, this is not the case.


When funds allocated for the paid search campaign run out, the website’s visibility in Google’s

SERPs does so as well. Still yet, one of the arguments commonly brought against SEO is that it

doesn’t produce consistent search engine ranking (Sen, 2005). This believed because Google

changes various aspects of its ranking algorithms over time (Malaga, 2007, p.80). However, one

the strongest arguments in favor of SEO is the fact that search engines themselves publish

guidelines on how to optimize Web sites for search engines (Beel, Gipp, & Eilde, 2010, p.177).

In addition, critics that fail to acknowledge that the actual positioning of a paid search

advertisement changes dynamically throughout the day, as it is c constantly updated and subject

to new and revised bids by other advertisers for that same keyword and/or keyword phrases

(Ozluk & Cholette, 2007, p. 350).

Overall, it is generally considered easier, in time and effort, for a company to be listed in

the paid results rather than in the organic (Ma, et al., 2010, p.31). However, although paid search

is the preferred Internet marketing strategy for most online business today, sponsored results are

far less likely to be selected by Internet users searching the web (Jansen & Resnick, 2006, p.

1950). In fact, empirical evidence suggests that most online users ignore the sponsored links

displayed in the paid-placement section (Shen, 2002).

Research conveys that organic results are more appealing to Internet users because the

results are considered more objective and unbiased (Kumar, 2007, p.8). Unlike paid placements,

popular search engines do not directly profit from organic results. Thus, organic results are

preferred by most Internet users (Xing & Lin, 2006; Jansen & Resnick, 2006; Sen, 2005;

Malaga, 2007) and therefore, also more likely to be to be selected. Organic listings also

constantly block spamming efforts or other inappropriate or “black-hat” (Malaga, 2008)


techniques that are used in an attempt to manipulate the rankings of organic results. Hence, users

can assume a certain level of reliability from vendors in organic search results (Ma, et al., 2010,

p. 31). Furthermore, because organic listings are more trusted, users are also more likely to buy

from them (Sen, 2005). Therefore, optimized websites appearing higher in SERPs also have a

higher conversion rate or-- sales per visit (Malaga, 2007, p.67).

Eye tracking, has been used to study human behavior for decades and has contributed the

understanding of activities such as reading, scanning, and overall processing of visual stimuli.

For online context, this translates to information about which components of a page are viewed

and how often, and the cognitive load or engagement present upon viewing those components

(Lorigo et al. 2008). Heatmaps as described by (Berendt, 2009), coveys “Heatmaps clearly

show– regardless of content – that people generally inspect pages in an “F shape”. This means

that the “organic ranking visibility” is high only for the first few results but then drops off

sharply (Berendt, 2009, p.754). Therefore, if a business plans to invest in SEO, its highly advised

This data is also consistent with (Jansen and Sprink, 2006).


As evident of user perception, the (Eyetools Research, 2005) Heatmap above depicts the

fixations by users on Google’s SERP. As the literature and research concur, the vast amount of

time and attention that is placed when viewing the content around the organic or natural listings.

ConclusionsConclusions

It is estimated that 90% of all new website visits originate from the Internet’s most

popular and frequently used search engines: Google, Yahoo, and MSN (Espadas, 2008, p. 1735).

Given this high percentage, it is more important now than ever for businesses to utilize search

engine optimization techniques to increase their website’s visibility on the World-Wide Web.

Increasing a website’s presence and overall visibility on-line is an essential part generating new

web traffic. Web traffic constitutes mostly, as an indicator of potential customer base and sales

growth for online businesses (Benbunan-Fich & Fich, 2004, p.166) and is often used as a


measure of success because higher traffic generally constitutes higher advertisement revenues

(Wolk & Theysohn, 2007).

Today, search engines are recognized to be as useful as and more cost effective than any

other method at driving web traffic (Mamaghani, 2009, p.130).

(Zhang, et al. 2009):

The usefulness of a search engine depends on the relevance of the results retrieved and ranked in response to user queries. While millions of Web pages may include a particular word or a phrase, some may be more relevant, popular, useful, or authoritative than others. Most search engines employ methods to rank the results to provide the best, most useful or most relevant results first (p.557).

Along with the exponential growth of the Internet and web search, Search Engine Marketing

paved the way for an effective way for businesses online to compete. Along with the increasing

importance of searches, search engines play greater roles as critical links between firms that use

the Internet to build their images and their target customers (Wu, Cook, Strong, 2005). Search

Engine Marketing is revolutionary in the sense that it “May level the playing field for small and

medium-sized enterprises with unknown brands, because well-known, “big” brands do not

necessarily own the top positions in SERPs” (Dou, Lim, Su, Zhou, & Cui, 2010).

With 82% of all online marketing activities go towards paid placement campaigns PPC is

undoubtedly the preferred Search Engine Marketing strategy of choice for most online

businesses today. However, as evident by the vast majority of both research and literature,

Internet users do not share the same enthusiasm. Although the distribution of the dollar suggests

that PPC is the most effective strategy, clearly it is a misperception. When comparing Search

Engine Optimization and Pay-Per-Click in terms of these strategies’ ability to generate web

traffic, Search Engine Optimization is generally almost always considered to be most effective.


Research proves that sponsored search results do not get near as many clicks as do the organic

search results. However, sponsored links can quite accurately be described as a mere quick and

easy “fix” for an advertising solution.


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SEO vs. PPC

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