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.
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.
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].