Organic Vs. Paid: What $10 Million In Search Revenue For Hewlett-Packard Tells Us

It certainly isn’t the first look at the relationship between paid and organic search, but new a new study by Resolution Media and Kenshoo claims to put an end to the debate over whether paid search campaigns cannibalize organic revenue or add incremental value, even when organic visibility is substantial.

Search agency Resolution Media and Kenshoo, a marketing technology company, analyzed a year’s worth of US paid and organic campaign data from Imaging and Printing Group (IPG) of Hewlett Packard (HP). The data set included only clicks and visits in instances where both a paid listing and at least one organic listing were triggered by the same keyword. More than $10 million in direct online sales revenue for each channel was accounted for in the data set.

The study found paid search drove a slightly higher (3.2 percent) net revenue per visit (NRPV) than organic search. (NRPV is calculated by subtracting paid cost per visit from paid revenue in order to compare it directly to organic revenue, which of course has no cost per visit.)

When IPG had a number one organic listing, consumers still clicked and converted on paid listings nearly 40 percent (39.6) of the time. And because the NRPV of paid search is 3.2 percent higher, net paid revenue share rose to 41.6 percent of total revenue.

Lift From Paid Search With Number One Organic Listing

With lower organic positions, paid search picked up more of the click share. Organic click share fell to 33 percent when organic listings are in positions 2 to 5 and to just 10 percent when they appear in the bottom half of the organic results in postions 6 to 10. Once organic positions fall off page one, paid’s net revenue per visit was 305 percent higher than organic.

Paid And Organic Cickshare By Organic Position

Organic search did drive higher performance for brand terms: 53.4 percent vs. 47.6 percent for paid. Net revenue share for organic branded terms was higher as well: 53.5 percent vs. 46.5 percent.

The story changes for non-brand terms. Paid search held a 77.2 percent click share vs. 22.8 percent for organic on non-brand terms. Net revenue share broke down as 70.3 percent paid, 29.7 percent organic.

Aaron Goldman, chief marketing officer at Kenshoo said of these results, “This research puts to rest the controversy over running paid search advertising for brands that have strong organic coverage. Our study shows that visitors arriving from paid search are more profitable than those arriving from organic search, even when you take into account traffic acquisition costs. Smart marketers, like those at Resolution and HP are embracing a holistic approach to search engine marketing to get the most out of their investment.”

All-in-all the findings aren’t particularly startling. Also, note Google’s recent introduction of the Paid & Organic report for marketers to compare their own data in AdWords. There’s a reason they want you to be able to see the relational perspective of paid and organic performance side by side. They’ve done their own studies.

The full report is available for download here [PDF].

Related Topics: Channel: SEM | Search Marketing: General | SEO: General | Stats: General | Stats: Search Behavior | Top News

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About The Author: writes about paid online marketing topics including paid search, paid social, display and retargeting. Beyond Search Engine Land, Ginny provides search marketing and demand generation advice for ecommerce companies. She can be found on Twitter as @ginnymarvin.

Connect with the author via: Email | Twitter



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  • TTP Online Marketing

    This is some great data. I plan on spending more time later and going through those numbers more thoroughly. The result is pretty much what I would have expected.

  • http://www.seo-theory.com/ Michael Martinez

    Really, the only way organic search revenue can have no cost-per-visit is if you don’t do anything to optimize for organic search. The costs for organic search engine optimization are usually hidden away in broader administrative costs, or maybe just IP costs. It’s unfortunate this study doesn’t provide a closer head-to-head comparison in costs.

  • Robert J. Duncan

    Meh.

    Net revenue is different then net profit. So this example only works on high-profit items/services.

    Also it would be nice to see the sample size or margin of error. Along with mobile and desktop breakdowns.

    Did time of year have different effects? Did the new Google “enhanced” platform effect costs/revenue?

    Did the paid searchers go to the same landing pages as the organic? Or at least down the same funnel? Did this take into account new visitors versus returning?

    Basically all this says to me is if you use paid search and organic you will generate more revenue compared to just organic.

  • Joe

    Study was done by a PPC company. I would be wary of their conclusions.

    From what I’ve read over the years, organic visitors show more net value than PPC visitors because organic visitors can browse around the site and make a more informed decision while PPC puts visitors into a funnel right away.

  • Joe

    Study was done by a PPC company. I would be wary of their conclusions.

    From what I’ve read over the years, organic visitors show more net value than PPC visitors because organic visitors can browse around the site and make a more informed decision while PPC puts visitors into a funnel right away.

  • Dan Patrick

    Your point certainly has some validity. However, Google has made a sustained effort in recent updates to push natural search results into a smaller area of page, so I wouldn’t dismiss these findings so quickly. And this is coming from an SEO Analyst… :(

  • Joe

    I don’t question their result that people are now clicking on PPC ads more than ever.

    I question this conclusion:

    “This research puts to rest the controversy over running paid search advertising for brands that have strong organic coverage. Our study shows that visitors arriving from paid search are more profitable than those arriving from organic search, even when you take into account traffic acquisition costs.”

    This is a dumb statement to make over only 10 million spend and 1 company’s results.

    At my company, we make $10 for every $1 we put into SEO and completely destroys SEM profitability. I realize that every company and industry is different but that’s a hefty statement to make with little to no backing.

  • Ginny Marvin

    Michael, True, there’s an interesting case study to be made there. You’re right, SEO does have costs associated with it. However, so does PPC above and beyond media spend — agency fees, landing page design, testing tools, etc.

  • http://www.brysonmeunier.com/ Bryson Meunier

    Joe, I’m the SEO Strategy Director for this PPC company and I can assure you that we do more than paid search. I’ve been doing SEO here for 8 years and we now do SEO for many of our largest clients, comprising a significant portion of our overall revenue. We’re a data driven organization, and this study is based on data, not bias.

  • Ginny Marvin

    Joe, Yep. You’re right to look at it as a case study, not a definitive answer that will apply to every company. You know you’re company best. And you’re certainly not alone in seeing great results from organic. I do think case studies like this can provide a framework for companies looking at their own paid and organic data. Also, In case you missed it, you might enjoy reading Matt Van Wagner’s piece on a case study he’s currently working on that happens to also look at the relationship between and paid and organic: The PPC Experiment You Never Dare Run http://searchengineland.com/the-ppc-experiment-you-never-dare-run-172325

  • http://www.brysonmeunier.com/ Bryson Meunier

    As Ginny says, every company and industry is different, but this study does show based on a large data set that paid search can have great results even with top organic ranking.

  • Joe

    Bryson, even if you do SEO, you’re making bold conclusions based on very little spend and only 1 company. My company spends almost 30 million/year on PPC and even then, I would NOT make the type of conclusions Kenshoo made.

    “This research puts to rest the controversy over running paid search advertising for brands that have strong organic coverage. Our study shows that visitors arriving from paid search are more profitable than those arriving from organic search, even when you take into account traffic acquisition costs.”

    This study doesn’t put to rest anything. It only puts to rest results for 10 million in spend.

    If you want to make statements like that, show us data/research for a vast amount of spend for different companies/industries.

  • http://www.brysonmeunier.com/ Bryson Meunier

    Point taken. But when you consider that this is the latest in a line of studies that demonstrates that paid search is effective when running both paid and organic search campaigns it becomes less surprising, as Ginny said, and not all that controversial of a conclusion to reach.

  • Joe

    It’s very controversial. You’re saying that SEM traffic is more profitable than those arriving from organic. How can you make a statement like this?

    What you should say is something like this:

    “We found that the net revenue of PPC visitors is higher than those of organic visitors based on our study of HP and $10 million in PPC spend. This does not indicate that PPC has a higher ROI than SEO.”

    I understand that you want to make bold statements to capture more PR but it’s totally misleading.

  • Durant Imboden

    Next time a site owner complains that “Google is hosing my rankings to make me buy ads,” Google can reply “Yes, and we’re doing you a favor!”

  • Roman

    This study needs to show a little more data to make such bold claims, such as cpc, organic positions..etc.It really depends on a case by case weather PPC or SEO is more profitable. Plus, this study is coming from an agency that’s mostly focused on branding rather then direct response.

  • disqusererer

    You may be arguing against someone detached from reality Joe. Best of luck with that!

  • http://www.brysonmeunier.com/ Bryson Meunier

    Proud to be detached from what Wall calls reality: http://www.brysonmeunier.com/talking-to-an-aaron-wall/

  • Jori Ford

    The conclusion that this article comes to is quite alarming as the comparable data points are not equivalent. That’s been pointed out by several others who have commented. However, what concerns me is that data driven = to market message starved in this instance.

    The keyword has nothing to do with how a user shops. It has to do with how a consumer finds.

    Without understanding the promotions, messaging, and other competitors message clicks count for nothing. Sure a user who sees get up to $30 off select HP Printers is going to click there before they click on Printers | HP. Not to mention, that a years worth of data when all the engines have had some of there most critical landscape changes, means squat. Position 1 in organic over the past year has gone from being the 3rd result above the fold to just barely being seen at the fold.

    I think it was a great effort and solid starting point, but the conclusion “Our study shows that visitors arriving from paid search are more
    profitable than those arriving from organic search, even when you take
    into account traffic acquisition costs.” has no real support based on the information shared.

  • Recruiters Map

    Excellent info!

  • Chris Zaharias

    This is a better study than most that have been done on the topic, but as eBay Labs proved earlier this year with their SEM attribution study, NRPV from SEM looks wildly lower when controlled for the fact that a majority of *either* SEM brand or non-brand visitors can and do find their way to the merchant’s site to convert when SEM is shut off. In eBay’s case, true returns from SEM were only *0.44% of total eBay sales*, which is more than an order of magnitude smaller than the yields that a search-specific study such as Kenshoo’s finds.

    True, that finding is particular to eBay, but HP is closer to eBay on the spectrum of known vs unknown brands. At the very least, HP should look to dynamic retargeting ads on Facebook’s 25% of display as an investment much more likely to drive truly incremental revenues and margins. Their FB retargeting ads are, as of this writing, static…

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