Hitmetrix - User behavior analytics & recording

PPC Programs Can Cannibalize Organic Clicks

Many search engine marketers think they don’t need to account for organic listing position when making pay-per-click buys, either because no relationship exists between the two or the relationship is one of simple, positive reinforcement.

This seemingly unlikely belief is supported eagerly by many in the industry with an interest in perpetuating an attitude conducive to maximum spending. In a recent study with a Fortune 1000 client, which for confidentiality purposes we’ll call “Company X,” we tested this cozy assumption. The results were startling.

Our test client was in an excellent position to conduct a study on organic cannibalization: high market share, a strong brand, a longstanding Internet presence and an aggressive ongoing PPC campaign. It had a multiplicity of listings that shared PPC and natural exposure.

Last summer, Company X’s PPC program was generating tens of thousands of visits a month. The company also was well represented in natural search, particularly for brand names.

To perform the study, Company X went “dark” for 10 days after a sustained buying effort, measuring the paid and organic traffic for 10 days before the dark period and comparing this – engine by engine and keyword by keyword – with the organic traffic during the dark period.

No significant changes were made to the Web site during these two periods. There were no big changes in factors like outside campaigns or major company news. Finally, overall traffic to the site on other sources was tracked to ensure that it stayed constant.

A summary of traffic is in the above chart.

In the 10-day “light” period, the site drew 28,000 visits, of which just over 50 percent were from natural listings. In the dark period – with other traffic very slightly down – organic visits were up to nearly 20,000. This means that its PPC program was providing incremental traffic (a 41 percent lift over organic traffic alone). However, it is also cannibalizing organic traffic. Depending on engine, anywhere from 20 percent to 50 percent of all PPC clicks would have been delivered organically.

Think of it this way: If this company is paying MSN $1 per click, its actual cost is $2 per incremental click. This is a dramatic difference when it comes to evaluating PPC effectiveness and internal PPC optimization. This does not mean that buying cannibalized words is always bad. If the initial cost was low enough, then the incremental cost still may be viable.

Not only were there profound (and consistent) differences by engine, but there were significant differences by keyword. And the most important variable in the degree of cannibalization turned out to be – no surprise – organic position. The higher the organic position, the more likely cannibalization was to occur. It was difficult to study the impact of paid position, because this site was almost always in the top two slots.

Because cannibalization varies by engine (with organic position held constant) and by position, the study suggests that a one-engine-fits-all strategy simply won’t work. Not only is organic strength quite different by engine, but the layout and habits of engines influenced the degree to which PPC and organic listings interacted.

If you have a significant natural presence, chances are you’re not optimizing your campaign. The worst-case scenario is if you’re using machine optimization and not taking account of organic cannibalization. Such a system would be very efficient at steering dollars into terms whose apparent (but not real) incremental cost is artificially lowered by organic cannibalization.

Plenty of people will give you the wholly self-interested “industry” point of view. But the best direct marketers know that there is no substitute for the relentless pursuit of measurement and incremental improvement. Though companies with different brands, different costs to buying brand words, different organic strengths and different product names will perform differently, this company’s experience suggests that you ignore organic placement at your peril.

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