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  1. 1. Running head: EFFECTS OF SEARCH ENGINE MARKETING 1 Search Engine Optimization vs. Pay-Per-Click By Aliah M. Thomas Texas A & M University, Commerce
  2. 2. SEO vs. PPC: Effects of Search Engine Marketing 2 The Internet has made it possible to take the contents and services of businesses in allindustries and sizes alike, to every corner of the world, enabling them the ability to achieve anunprecedented amount of potential customers (Espadas, 2008, p.1727). According, approximately 1.96 billion people around the world now have access tothe 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 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 foreach user query, users only looks at a select few. In fact, 73% of search engine user’s never lookbeyond the first page of returned results (Jansen & Sprink, 2006). In today’s technology-savvy world, consumers are spending far less time and attention ontraditional 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 91millions searches each day. This constitutes for almost 60% of all Web search that’s conductedonline. Given that a top position could potentially lead to tens-of-thousands of new prospects, formost online businesses today, Google is the preferred search engine of choice. Given its immense growth and popularity within recent years, the Internet has become anincreasing competitive market. There are easily hundreds or thousands of relevant pagesavailable on the Web (Avrachenkov & Litvak, 2006, p.319) that compete everyday against otherswith 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 tofound before their competitors.
  3. 3. SEO vs. PPC: Effects of Search Engine Marketing 3 “Search Engine Marketing or SEM is essentially the utilization of search engines as amarketing tool for a business.” (Mamaghani, 2009, p.131) Because Search Engine Marketingallows even small companies with limited capital to compete for a strong position in the onlinemarketplace SEM has become one the most popular forms of online marketing today. SearchEngine Marketing accounted for at $14.7 billion dollars in revenue generated in 2009. Accordingto 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 relatedproducts and services. Both Internet marketing strategies are designed to generate web traffic byincreasing a website’s visibility in the search engine results pages or SERPs. Google’s SERP isdisplayed in two categories: Organic or natural search results, associated with SEO, appear onthe top, left hand side of the user’s screen and are generated by search engine’s proprietaryalgorithms. Paid or sponsored results, associated with PPC, appear on the top, right hand side ofthe user’s screen and are listed because content providers or advertisers have paid the searchengine 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 shiftingtheir advertising budgets from the traditional print (newspaper and magazine), direct mail andtelevision 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 impactthese 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 paidplacement (PPC) campaigns. The distribution of dollars suggests that Pay-Per-Click is perceived
  4. 4. SEO vs. PPC: Effects of Search Engine Marketing 4as 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 thesponsored listings. Given the discrepancy, it’s not difficult to see why so many online businessesremain confused as to which online marketing strategy is most effective. These companies oftenwonder, “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 SearchEngine Optimization in comparison to Pay-Per-Click. Essentially, both Internet marketingstrategies have become increasingly popular as highly effective methods for improving searchengine rankings and generating new web traffic. However, this paper will provide insight as towhich SEM strategy is most effective, in terms of its ability to generate web traffic. Theconclusions derived will be based on the accumulation of data collected and analyzed from[thirty] recently published, peer-reviewed journal articles. In efforts to ensure consistencyamongst the comparisons within the literature, Google will be the only search engine of focus.
  5. 5. SEO vs. PPC: Effects of Search Engine Marketing 5Google’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 usersthat search the web. It is important to note that Top Sponsored Links very seldom show in thearea referenced. This is also true for the Optional Information Feeds. However, in efforts toensure objectivity, all potential placement possibilities have been displayed. It is also importantto 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.
  6. 6. SEO vs. PPC: Effects of Search Engine Marketing 6Discussion “Search Engine Optimization (SEO), is a set of techniques that are aimed at improvingthe “natural or organic” ranking of a website in search engine listings, thereby making it morelikely 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 orphrases (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 primarilyonline, such as e-commerce, commercial portals, and subscription-based news media andresearch sites.” (Freedman, 2009) SEO is also important for businesses that use their websites togenerate sales leads (Kumar, 2007, p. 5). For these companies, understanding which factors caninfluence a page’s ranking in a search engine is crucial for any web site that wishes to attractlarge numbers of users (Evans, 2007, p. 22). In addition, these companies must also have anunderstanding of search bots, ranking algorithms, key-word density, and other complexities aswell (Freedman, 2008). SEO involves analyzing and modifying website to enable search enginesto read it, understand it, and index (or catalog) it correctly. These techniques includemanipulation 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 toGoogle’s search engine, “Page Rank is one of principle criteria according to which it ranks webpages.” (Avrachenkov & Litvak, 2006, p.319) Search Engine Optimization (SEO) is generally considered a very complex and timeconsuming process. This is because organic search results are selected and ranked on the basis ofsearch engine’s proprietary algorithms (Ma, et al., 2010, p. 31). There are over 200 differentfactors (or signals) used by Google to calculate a page’s rank (Evans, 2007, p.23). These factors
  7. 7. SEO vs. PPC: Effects of Search Engine Marketing 7are intended both to prevent the deliberate manipulation of SERPs as well as to ensure thatGoogle 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 makethe techniques much harder and arguably more costly to implement. Ultimately, this has lead tothe 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 thesuccess of the major Search Engines—for example, 99 percent of Google’s revenue came frompaid search advertising like Google Adwords (Kumar, 2007, p.8). Paid search accounted for $23billion for Google alone in 2009. Paid search functions on a “pay-per-click” basis. This meansthat with PPC, the site owner only pays when a user actually clicks on the ad and visits the targetsite (Malaga, 2007, p.68). While not all clicks may result in sales, the advertiser expects that aportion of the users who click through the displayed ad will make a purchase of the advertisedproduct(s) either now or in the future, or that the advertiser will otherwise benefit from the user’sclick (Ozluk & Cholette, 2007, p. 350). Despite the increasing importance and rising popularity of search engines, attentionpertaining 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 likelyto click on the published ad (Ozluk & Cholette, 2007, p. 351). In essence, a better positioningyields a higher Click-Through-Rate (Feldman et al., 2006). In their most recent journal article
  8. 8. SEO vs. PPC: Effects of Search Engine Marketing 8(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 theability to achieve maximum exposure, yet still allows them to control and monitor the amountspent on towards the campaign. To obtain placement within the sponsored results, advertisersplace bids on relevant advertising keywords and/or keyword phrases. The amount of the bids andother factors (such as how often an ad is clicked) determine where the ad is placed in Google’sSERP (Malaga, 2009, p.132). Generally, the higher the bid, the higher the advertisement isdisplayed in the sponsored list. However, if a keyword is bid upon on by multiple advertisers, thesearch engine then holds an instantaneous, automated auction to determine which of theadvertisers 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 thesame keyword and gives higher positions to the ads that generate more clicks over those whooffer 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 areinterested in locating a product or service. Sponsors are primarily interested in obtainingqualified 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 threespecific 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
  9. 9. SEO vs. PPC: Effects of Search Engine Marketing 9loyal customers. Secondly, if the establishment consists mostly of resellers and already areincurring a loss in profit, due to the depreciation of goods sold as well as the higher costassociated with middlemen. Finally, a company in which the majority of business is notconducted 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 weekof activating the campaign. Unlike PPC, one of the drawbacks in utilizing the techniques of SEOis the considerable amount of time it takes to implement (Malaga, 2009, p. 135). SEO has beenknown 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 businessesprimarily 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 SEOtakes longer to implement it is important to point out that an optimized site does not drop off thefirst 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 organiccompetitors (Ma, Pant, & Sheng, p.31). Established according to a bidding, amounts of10-12$/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, SEOwill 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’sSERPs does so as well. Still yet, one of the arguments commonly brought against SEO is that it
  10. 10. SEO vs. PPC: Effects of Search Engine Marketing 10doesn’t produce consistent search engine ranking (Sen, 2005). This believed because Googlechanges various aspects of its ranking algorithms over time (Malaga, 2007, p.80). However, onethe strongest arguments in favor of SEO is the fact that search engines themselves publishguidelines 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 searchadvertisement changes dynamically throughout the day, as it is c constantly updated and subjectto 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 inthe paid results rather than in the organic (Ma, et al., 2010, p.31). However, although paid searchis the preferred Internet marketing strategy for most online business today, sponsored results arefar 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 linksdisplayed in the paid-placement section (Shen, 2002). Research conveys that organic results are more appealing to Internet users because theresults 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 arepreferred 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 alsoconstantly 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, userscan 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
  11. 11. SEO vs. PPC: Effects of Search Engine Marketing 11from them (Sen, 2005). Therefore, optimized websites appearing higher in SERPs also have ahigher conversion rate or-- sales per visit (Malaga, 2007, p.67). Eye tracking, has been used to study human behavior for decades and has contributed theunderstanding 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 viewedand 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 clearlyshow– regardless of content – that people generally inspect pages in an “F shape”. This meansthat the “organic ranking visibility” is high only for the first few results but then drops offsharply (Berendt, 2009, p.754). Therefore, if a business plans to invest in SEO, its highly advisedThis data is also consistent with (Jansen and Sprink, 2006).
  12. 12. SEO vs. PPC: Effects of Search Engine Marketing 12 As evident of user perception, the (Eyetools Research, 2005) Heatmap above depicts thefixations by users on Google’s SERP. As the literature and research concur, the vast amount oftime and attention that is placed when viewing the content around the organic or natural listings.Conclusions It is estimated that 90% of all new website visits originate from the Internet’s mostpopular 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 searchengine 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 newweb traffic. Web traffic constitutes mostly, as an indicator of potential customer base and salesgrowth for online businesses (Benbunan-Fich & Fich, 2004, p.166) and is often used as ameasure 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 anyother 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 Marketingpaved the way for an effective way for businesses online to compete. Along with the increasingimportance of searches, search engines play greater roles as critical links between firms that usethe Internet to build their images and their target customers (Wu, Cook, Strong, 2005). Search
  13. 13. SEO vs. PPC: Effects of Search Engine Marketing 13Engine Marketing is revolutionary in the sense that it “May level the playing field for small andmedium-sized enterprises with unknown brands, because well-known, “big” brands do notnecessarily 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 isundoubtedly the preferred Search Engine Marketing strategy of choice for most onlinebusinesses 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 suggeststhat PPC is the most effective strategy, clearly it is a misperception. When comparing SearchEngine Optimization and Pay-Per-Click in terms of these strategies’ ability to generate webtraffic, 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 organicsearch results. However, sponsored links can quite accurately be described as a mere quick andeasy “fix” for an advertising solution.
  14. 14. SEO vs. PPC: Effects of Search Engine Marketing 14 BibliographyAvrachenkov, K. & Litvak, N. (2006). The effect of new links on Google page rank. Stochastic Models, 22(2), 319.Beel, J., Gipp, B. & Eilde, E. (2010). Academic search engine optimization. Journal of Scholarly Publishing, 41(2), 176.Benbunan-Fich, R. & Fich, E. (2004). Effects of web traffic announcements on firm value. International Journal of Electronic Commerce, 8(4), 161.Berendt, B. (2009). Ranking -- Use and usability. Bulletin of the Belgian Mathematical Society, Simon Stevin, 16(4), 745.Cahill, K. & Chalut, R. (2009). Optimal results: What libraries need to know about Google and search engine optimization. The Reference Librarian, 50(3), 234.Daniela, D. & Anca, B. (2008). Optimization Methods of PPC Campaigns. Annals of the University of Oradea, Economic Science Series, 17(4), 1337-1341.Dou, W ,Lim, K. H., Su, C., Zhou, N., & Cui, N. (2010). Brand positioning strategy using search engine marketing. MIS Quarterly, 34(2), 261.Espadas, J. (2008). Web site visibility evaluation. Journal of the American Society for Information Science and Technology, 59(11), 1727.Evans, P. M. (2007). Analyzing Google rankings through search engine optimization data. Internet Research, 17(1), 21.Eyetools Research (2005). Retrieved October 14, 2010, from
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  17. 17. SEO vs. PPC: Effects of Search Engine Marketing 17Xing, B. & Lin, M. Z. (2006). A cost-effective critical path approach for service priority selections in grid computing economy. Decision support systems, 42(3), 1628-1640.Zhang, Y., Jansen, B. & Spink, A. (2009). Identification of factors predicting click through in web searching using neural network analysis. Journal of the American Society for Information Science and Technology, 60(3), 557.Zhongming, M., Pant, G., & Sheng, O. (2010). Examining organic and sponsored search results: A vendor reliability perspective. Journal of Computer Information Systems, 50(4), 30.