For clarification, the comments in this post will be restricted to local service businesses only.
If you’re running an e-commerce business, or a national company – doing both is always going to be the right answer.
However, that may not always be the case for local businesses, which is what this post is going to be about.
With that, let’s get started.
The question of SEO versus Paid Traffic is commonly present among circles of online marketing.
The truth is that both methods work incredibly well and can fuel business growth greatly, when executed correctly.
Both methods, however, can also burn through your budget when not executed correctly. There’s no shortage of stories of business owners being burned by an agency who failed to fulfill their promises; but we’ll leave that out of the equation for now.
The direction that I would like to take on this post is that of a quantitative analysis, as opposed to a qualitative one.
Meaning, I’d like to explore things like costs, return on ad spend (ROAS), growth opportunities, and so forth; and following this analysis, you should be better equipped with what direction you’d like to go on.
So, let’s tackle the first issue:
Marketing expenditure is arguably one of the biggest expenses incurred by most businesses, and it is my believe, that most people really don’t focus on marketing enough.
That might be because advertising has always been practically inefficient for most small businesses, who’ve had to rely on word-of-mouth and referrals to fuel their growth.
Also because there’s a lot of misinformation in the marketing world, a fact that rings all too true nowadays.
However, with the arrival of Google and Facebook, the game has taken a different direction altogether.
Programs like AdWords & Facebook Advertising have made it practical, and profitable for small business owners to grow their enterprises at greater rates.
The very factor that makes these platforms so compelling for smaller companies is cost efficiency per dollar spent.
Particularly, that you can get started with as little as $5 per day, and work within your means as you grow slowly.
A very different world from television, magazine, or other traditional mediums that typically required large upfront payments without promise of tangible returns.
But that’s tangential, let’s look at the numbers.
SEO is not the greatest of options for small businesses because of the costs involved.
Yes, the promise of search traffic is very compelling, but highly illusory. There’s no such thing as “free traffic” on Google. There is an investment, typically substantial, before the achievement of said free traffic.
That’s because SEO is highly reliant on quality backlinks for rankings, and it costs a bit of bread to get these backlinks.
Now, you can try to play the algorithm and use “grey hat” SEO techniques which will yield great results, but you’ll always be at Google’s mercy because you’re breaking their Webmaster Guidelines.
“Grey Hat SEO” refers to private blog networks (PBN). These are websites that you own which were previously owned & operated by other people.
PBN’s have pre-existing link equity, they’re affordable, and give you full control over your backlink profile, which means – higher rankings for less.
But they’re analogous to investing in junk bonds. You get higher interest returns at the expense of greater risk of default, so you have to have the “stomach” to take that approach.
For smaller businesses, this is the only option when it comes to SEO; if you abide by the rules and “play it safe”, it’ll cost too much and take too long.
Here’s an example:
Let’s say we’re running a general contracting firm in Miami, FL, and we’d like to see which approach would be better from a cost-benefit perspective:
SEO, or Paid Traffic.
For the sake of simplicity, we’ll only use 5 keywords and the “exact match” traffic from Google AdWords.
If we were to achieve top 3 ranking for all five of these keywords, our expected traffic would be roughly 350 organic search clicks per month.
That’s 10% CTR off of 3500 monthly impressions. Again, this is coming from Google, itself.
Now, generally, this industry produces lead-conversion rates of 25%. Meaning, 1 in every 4 visitors to your website becomes a lead.
A lead is someone who applies for a quote, or gives you a phone call.
In this example, SEO would yield 87.5 leads, “for free”.
Let’s make a guesstimate and assume that 1 in 5 leads becomes a customer, with an average revenue per gig of $10,000.
According to HomeAdvisor.
That’s 18 (rounded) sales per month for a total of $180,000 monthly revenue. Or $2.16M per year.
However impressive this may be, general contracting firms typically run at around 5% net net, that’d be roughly $100,000 in take home profits for the company.
What would be the cost required to produce these rankings?
Using Grey Hat SEO, it would cost roughly $1000.
The average expired domain costs about $25, there’s an additional $7.5 for the website content, and $7.50 more for private registration.
That’s $40 per domain, and we’ll need about 25 of them to produce this ranking. That’s $1000.
Using White Hat SEO, it would cost around $3800.
You need a large blog post to drive links to, the total expenditure for a freelance writer would be about $600 for a quality article.
You’re going to have to outsource link prospecting, so that’ll be an additional $1200 for 200 hours of work.
And most webmasters charge $40 per link to add on their website, so you’ll need allot $2000 for a total of 50 links.
The reason you need 50 links for “white hat” is because the links aren’t coming from the home page as they are with PBN’s, so you’ll need more links to account for the loss of link equity.
Still, a $3800 investment for $100,000 returns is nice, especially when you consider that you’re looking at a small amount of keywords; with SEO, you can rank for thousands and thousands of keywords all at once because what drives rankings is the domain authority of the website, which continues to grow with every added link.
It doesn’t take a larger investment to produce top 3 rankings for 5 keywords, than it does for 10,000 keywords. The competitors on the first page are what dictates the investment needed, not the size of the website.
According to Google’s algorithm, as the strength of the website rises, so do all pages on that website. The ranking increases are all across the board, so having more pages and more keywords is actually great because you’ll rank for more terms for the same investment.
Now, when it comes to costs with PPC, the big sort of “elephant in the room” is that you have to continue to pay for every click until the end of time.
For example, with SEO you’d invest $3800 and make $100,000 at the end of the year, in this example. Approximately, a 25X return.
For the same traffic, you’d have to invest $3500 every month, for twelve months, with PPC.
That’s 350 clicks a month at roughly $10 per click. Of course, you could most likely cut that down to $5 per click with quality scores, bid adjustments, and other measures, but the return on investment would still be less than SEO.
Using the latter scenario, of $5 per click, the return would still be a “pale” 5X.
That’s $5 per click for 350 clicks monthly for 12 months which equals $20,000 in advertising for the year.
But the 25X return is only if you get it “right” on the first try with SEO; which leads us to the next point…
The great advantage for PPC is control.
You control the specific keywords that you want to bid on, who you want to show it to, at what time, on what position, and you can adjust the ad copy without any adverse effects on your results.
With SEO, your control is limited. Google changes its algorithm often, there are competitors trying to screw with your website, there’s things outside of your control like filters and other things Google uses to screen for spam.
These are all factors that can affect your rankings, and there’s not much you can do about them.
Sometimes you might do everything right, invest thousands of dollars, let six months go by, and not see a sign of movement.
And it’s happened to everybody, and it’s a big “knock” against SEO.
If you get it right, it’s fantastic, if you don’t – it can be pretty deadly. It’s made all the worse because SEO takes times, and so you never really know whether you’re “doing it right” because the feedback loop is so slow.
With PPC, your ads could be running tomorrow at full blast, and running at a substantial profit.
That’s its big “plus”.
But hold on a minute. We haven’t talked about Facebook Ads.
Facebook is a little different.
See, on Google, at any given time only about 5-10% of your potential marketplace is actively searching for terms related to your industry.
In this case, “general contracting” related terms.
What Facebook allows you to do is target anyone who could possibly be interested in your offering. For this scenario, we’d target homeowners in South Florida who are interested in Home Improvement. (Not the show).
That’s a potential reach of 180,000.
A great audience, for our intents and purposes.
Ideally, you’d like to spend $1500 per month in advertising.
That would give you roughly 50,000 impressions which would net 80 leads or so, and about 30 to 40 new gigs, every single month.
That’s a $1500 investment for $350,000ish in revenue. Following the same 5% net profit logic, that would be $17,500. In other words, a 11.67X return.
More than AdWords (5X), less than SEO (25X).
So, what’s the final verdict?
III: Long-Term Growth
These numbers here are “typical”, meaning they’re what you should expect from well-executed campaigns.
You could do better, you could much worse. But on average, this is what you should expect.
So what’s the conclusion? Probably the same you were expecting when you started reading:
#1 – Start with PPC, and get early returns. Use that growth to fuel further investments into Facebook Ads.
#2 – Get AdWords & Facebook Ads locked in and returning significant profits regularly.
#3 – As time passes, start investing into SEO as a long-term strategy. Because PPC & FB will be getting you great returns, you won’t be pressed for immediate results – which you shouldn’t expect from SEO, regardless.
#4 – As your organic rankings increase, you can eliminate PPC all together, or reduce your costs significantly by being very selective about the keywords that you do bid on.
#5 – Use retargeting, display, e-mail, social media, and promotions to continue to open new frontiers.
#6 – Sell, expand, retire – your choice.
Really all this comes down to is about being strategic towards your online strategy. It’s a big world filled with opportunities, so there will never be a time when you go:
“Huh, I guess there’s nothing else we can do…”
There’s always something you can do to open new doors. Here’s a few ideas:
- Bing Ads
- Yelp Ads
- YouTube Ads
- Reddit Ads
- Twitter Ads
- Instagram Ads
- Snapchat Ads
- LinkedIn Ads
There’s always going to be more opportunity that you can handle. Master the big 3 first: AdWords, Facebook Ads, & SEO (in that sequence).
From there: try, err, invent, discover, and grow!