A RESOLUTION KENSHOO WHITE PAPER. The Search Sandbox: Paid Plays Well With Organic

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1 A RESOLUTION KENSHOO WHITE PAPER PREPARED FOR The Search Sandbox: Paid Plays Well With Organic September

2 TABLE OF CONTENTS Introduction... 3 Background... 3 Paid Search listings... 3 Organic Search listings... 4 Executive Summary... 4 Key Findings Paid Search drives a slightly higher Net Revenue per Visit (NRPV) and delivers added benefits Even when the Organic result is in first position, consumers still click and convert on paid ads Paid Search fills in the gaps as Organic rankings drop on the first page Paid Search is the only viable option when Organic results fall off the first page Organic Search drives higher Brand Term metrics Paid Search drives much stronger Non-Brand metrics... 9 Recommendations ) Leverage Paid Search ) Find the right mix of Paid and Organic for your business ) Ensure coverage of Brand and Non-Brand terms through Paid and Organic Methodology Glossary About Resolution Media About Kenshoo Contact

3 INTRODUCTION Many of the brands we work with often wonder about the value of Paid and Organic Search for their business and how to achieve the optimal balance on a Search Engine Results Page (SERP). This study analyzes the relationship between Paid and Organic Search Marketing for a major retail division of Hewlett Packard (HP) in the U.S. The dataset covers millions of visits for each of the Paid and Organic Search channels and addresses more than $10 million in direct online sales conversion revenue for each channel. Through our research, we sought to answer the following key questions: 1. Which channel (Paid or Organic Search) drives more clicks and more revenue? 2. Is there any incremental value in Paid Search ads when the brand s Organic listing for that keyword is at the top position? 3. For Organic listings still on the first page, what is the correlation between various rank positions and how can Paid Search strategies best complement the exposure? 4. When Organic results do not appear on the first page, how valuable is Paid Search? 5. How do the results vary between Brand and Non-Brand terms? BACKGROUND To ensure the findings in this study can be understood and activated, it is important to have an understanding of Paid and Organic Search, including their definitions and key variables. Paid Search listings (also called search ads or PPC Pay Per Click) Listings are shown based on what an advertiser is willing to pay per click, relevancy to the search and searcher, and other factors determined by the search engine. The following are things to consider with any Paid Search program: 1. Speed keywords and ads can be uploaded and live in a matter of a few hours. 2. Control advertisers have full control of what is shown and where consumers are taken once they click on the ad. Savvy advertisers carefully decide which keywords they wish to bid on more aggressively and drive those visitors to a specific landing page designed to meet the intent of the search query. 3. Cost while being a very powerful advertising channel, the disadvantage is that every click incurs out-of-pocket costs whether it drives revenue or not. 3

4 Organic Search listings (also called natural search or SEO Search Engine Optimization) Listings are ranked based on what the search engine deems to be the most relevant asset. Advertisers don t pay per click, but do spend money on efforts optimizing pages and content to show within the SERP. Following are things to consider with any Organic Search program: 1. Sustainable because advertisers don t pay per click, incremental clicks can be generated without adding to pre-planned costs and brands can try to capture as many clicks as possible. 2. Lead time Organic Search listings take time to optimize. Unlike Paid Search, Organic Search results can take anywhere from 4 8 weeks and beyond to properly optimize and show on a SERP. 3. Limited control brands can influence the listings based on optimizations, but can t completely control how the content is displayed this is at the discretion of what the search engine spider crawls and indexes. Understanding this complex relationship between Paid and Organic Search is not easy. Both the Paid and Organic landscapes are in constant motion with ranking factors fluctuating, competitors entering and leaving the market, and consumer trends and market conditions shaping the Return-on-Investment model. Some advertisers spend millions of dollars in Paid Search each month with fantastic return while others advertisers have opted out of buying traffic due to their strong Organic presence. However, many brands who engage in search marketing utilize both channels to achieve their business objectives. Search has proven to be an indispensable complement to other advertising efforts at every stage in the buying cycle. The key is to find the right balance in order to not spend needlessly on Paid Search where Organic is strong, while using Paid Search very strategically to fill the gaps where Organic doesn t capture the full opportunity available. EXECUTIVE SUMMARY Within this study, five major findings arose: 1. Paid Search drives a slightly higher Net Revenue per Visit (NRPV) and delivers added benefits. Not only does Paid Search monetize better than Organic Search, it provides marketers with greater control and the ability to conquest competitors as well as delivering marketing insights that can be applied across other channels. 2. Even with the Organic result at first position, consumers still click and convert on Paid ads. Top, natural listings are highly visible, yet consumers still find Paid Search ads relevant enough to click and convert. 4

5 3. Paid Search not only fills in the gaps as Organic rankings drop on the first page, it is also the only viable option when Organic results fall off the first page. The evidence clearly shows a direct correlation: as Organic rankings fall, Paid Search Click Share and Net Revenue Share both increase steadily. Click Share is the percentage of total clicks achieved by the marketer when both a Paid Search and Organic listing appear together. 4. Organic Search drives higher Brand Term metrics. Brand keywords tend to deliver higher Organic rankings than Non-Brand Terms and thus are able to capture more Click Share and Net Revenue per Visit. 5. Paid Search drives much stronger Non-Brand metrics. On average, Non-Brand Terms tend to rank more poorly than Brand Terms, so they generally appear in lower on the SERP or even off of the first page. For Non-Brand Terms, Paid listings can still appear at high average positions and provide the required lift. KEY FINDINGS! Paid Search drives a 3.2% higher Net Revenue Per Visit than Organic Search. 1. Paid Search drives a slightly higher Net Revenue per Visit (NRPV) and delivers added benefits Some critics have argued that Paid Search cannibalizes revenue from Organic listings. However, our dataset shows that Paid Search drives a 3.2% higher NRPV than Organic Search. NRPV is calculated by subtracting Paid Cost per Visit from Paid Revenue to make it directly comparable to Organic Revenue (which carries no Paid Cost per Visit). Even if NRPV was equal, having an extra (Paid) link on the SERP is more valuable than having just the Organic link for these additional reasons: 1. A Paid listing takes up space where a competitor s ad could appear. An additional SERP link to your site increases the chance one of your listings will be seen on what could be the most valuable real estate on the Web for many businesses. This type of competitive conquest could potentially keep other advertisers out of the consumer s consideration set as people research and browse. 2. Search marketers can control the ad text; tactics can be used to differentiate the paid copy from Organic snippet. This makes marketers twice as likely to demonstrate relevance to the searcher than with just one link. 3. There s tremendous value in the data that a marketer can collect with Paid Search. Advertisers are able to understand which originating query or keyword initiated the ad call while some search engines may block that level of data with all or a percentage of Organic searches. This nugget of insight about what s important to the consumer 5

6 can be utilized as a data point to drive crucial optimization such as landing page customization, off-site retargeting, lead scoring, etc. For example, a furniture advertiser that can segment visitors to its site by keyword groups such as dining room searchers, living room searchers, or bedroom searchers can leverage that information to serve the visitor more offers and content that matches the original intent of the visit. Without knowing the originating keyword, a marketer cannot engage in these advanced and effective tactics. 2. Even when the Organic result is in first position, consumers still click and convert on paid ads Some search marketers feel that paid listings are not needed for keywords that already garner first place in Organic results. However, this research shows there is significant value in Paid Search, even when the Organic link is at the top of the natural listings. In Figure 1, you can see that when a paid listing appears on a SERP with the top Organic listing for the same keyword, Organic Search garners 60.4% of the clicks, while Paid Search gets 39.6%. In addition, because Paid Search s NRPV is slightly higher than Organic, Net Paid Revenue Share rises to 41.6% of total revenue as seen in Figure 2. So, even when the Organic listing is in first position, consumers still click on the Paid Search ad and convert. The argument can be made that all of the clicks and revenue would have been achieved by the Organic listing without the Paid Search ad. However, it s a safe assumption (and research over the years, like this study, has provided evidence of this) that Paid Search has a true, incremental value that complements Organic. Figure 1: CLICK SHARE WHEN ORGANIC RESULT IS IN TOP POSITION Figure 2: NET REVENUE SHARE WHEN ORGANIC RESULT IS IN TOP POSITION 39.6% 60.4% 41.6% 58.4% n Paid Click Share n Org Click Share n Net Paid Rev Share n Org Rev Share Source: The Search Sandbox by Resolution Media and Kenshoo

7 3. Paid Search fills in the gaps as Organic rankings drop on the first page When Organic listings drop in rank, there is a very clear correlative effect as Paid Search Click Share rises and supplements traffic. Per Figure 3, after the top ranking, Paid Search ads alongside Organic listings in position 2 5 receive 2 out of every 3 clicks from the SERP. It s even more dramatic when Organic results are well below the fold in positions 6 10, with Paid Search responsible for 9 out of 10 clicks to the website. Figure 3: CLICK SHARE BY ORGANIC POSITION 100% 80% 60% 40% 67% 90% 51% 40% 20% 0% 60% 33% 49% 10% Org Pos 1 Org Pos 2 5 Org Pos 6 10 All Source: The Search Sandbox by Resolution Media and Kenshoo 2013 Paid Click Share Org Click Share 4. Paid Search is the only viable option when Organic results fall off the first page One of the core value propositions of Paid Search is that advertisers can maintain a presence on the first page of results even when Organic listings for that same keyword do not appear. In these instances, advertisers would not generate any significant clicks or revenue for these keywords unless they engaged in Paid Search practices. As you can see in Figure 4, Click Share is virtually even when Organic results appear on the first page, however, Paid Search garners 93.1% of search engine clicks from the same keyword when Organic results do not appear on the first page. With revenue, there s even more disparity. Per Figure 5, Organic listings generate significantly less in Revenue Share versus Paid Search when appearing on page 2 and beyond. 7

8 Figure 4: CLICK SHARE BY ORGANIC POSITION 100% Figure 5: REVENUE PER VIST BY ORGANIC POSITION 305% higher 80% 60% 51% 93% $ 2.6% higher 40% 20% 0% 49% Page 1 Paid Click Share 7% Page 2 and beyond Org Click Share Source: The Search Sandbox by Resolution Media and Kenshoo 2013 Page 1 Net Paid Rev Per Visit Page 2 and beyond Org Rev Per Visit 5. Organic Search drives higher Brand Term metrics Organic Search drives a slightly higher Click Share (52.4% vs. 47.6%) and Net Revenue Share (53.5% vs. 46.5%) on Brand Terms compared with Paid Search. See Figures 6 and 7. This makes sense because Brand Terms typically rank higher organically on the search engine results pages than Non-Brand Terms based on how search engine algorithms are generally calibrated. As we uncovered earlier in this study, the higher the Organic term is ranked, the better it is at driving performance. Figure 6: CLICK SHARE (BRAND) Figure 7: NET REVENUE SHARE (BRAND) 47.6% 52.4% 46.5% 53.5% n Paid Click Share n Org Click Share n Net Paid Rev Share n Org Rev Share Source: The Search Sandbox by Resolution Media and Kenshoo

9 6. Paid Search drives much stronger Non-Brand metrics When it comes to Non-Brand Terms, Paid Search clearly outpaces the performance of Organic Search with a 77.2% Click Share and a 70.3% Net Revenue Share. More than twothirds of all clicks and Net Revenue are generated by Paid Search for Non-Brand keywords. Figure 8: CLICK SHARE (NON-BRAND) Figure 9: NET REVENUE SHARE (NON- BRAND) 77.2% 22.8% 70.3% 29.7% n Paid Click Share n Org Click Share n Net Paid Rev Share n Org Rev Share Source: The Search Sandbox by Resolution Media and Kenshoo 2013 RECOMMENDATIONS 1) Leverage Paid Search There s definitely value to running Paid Search alongside Organic results, even if your company has a strong Organic Search presence. In this study, we found Paid Search drives the following benefits: a. Higher Net Revenue Per Visit (NRPV) b. Fill gaps in SERP real estate c. 100% control over copy, messaging and landing page selection 2) Find the right mix of Paid and Organic for your business Figure out where the gaps are in your Organic Search presence and use Paid Search to fill in those holes. This study did not dive into segmentation by location, device, or time of day/day of week, but these data points can be tracked via web analytics and integrated within advanced search marketing technology platforms. Using fine controls, marketers can zero in on exactly where paid ads can be effective when paired with Organic listings. 9

10 3) Ensure coverage of Brand and Non-Brand terms through Paid and Organic Determine how to spend marketing budgets based on the position mix that works for you. Remember, when Organic rank drops, Paid Search drives more traffic. Organic search gets the bulk of branded traffic, while Paid Search is skewed towards non-brand. METHODOLOGY For the purposes of this study, Resolution Media and Kenshoo analyzed a full year (Feb. 28, 2012 March 1, 2013) of U.S. campaign performance results from the Imaging and Printing Group (IPG) of Hewlett Packard (HP). The data set focuses solely on clicks and visits and includes only instances where both a Paid Search ad and (at least one) Organic Search listing were triggered by the same keyword. Annual average Organic ranking and average Paid Search position were used as proxies for position metrics throughout this research as the actual positions for every instance of a SERP are not available. GLOSSARY Brand Terms Keywords that contain the marketer s company name or products specific to that company. Brand Terms example include: HP, Hewlett Packard, HP Photosmart, etc. Cannibalization Keywords that compete with each other forcing the advertiser to spend more money on listings, generating the same revenue. Click Share The percentage of total clicks achieved by the marketer when both a Paid Search and Organic listing appear together. For example, if there are 5 clicks from 100 Paid Search impressions and 10 clicks from Organic searches (when the paid search ad is also displayed), the resulting 15 total clicks comprise a 66.6% Organic Click Share (10/15) and a 33.3% (5/15) Paid Search Click Share. Net Paid Revenue Paid Search revenue minus the direct media costs from those clicks. For example, if Paid Search costs $100 and generated $500 in sales revenue, the Net Paid Revenue would be $400. Organic listings do not incur direct media fees so the revenue generated is inherently a net number. Net Revenue Per Visit Net Revenue Per Visit (NRPV) is calculated by subtracting Paid Cost per Visit from Paid Revenue to derive a number that is comparable to Organic Revenue (which carries no Paid Cost per Visit). 10

11 Net Revenue Share The percentage of revenue for Organic or Net Paid Revenue divided by Total Revenue. For example, if Organic revenue is $100 and Net Paid Revenue is $150, total revenue would be $250. The Net Rev. Share for Organic would be 40% ($100/$250) and 60% ($150/$250) for Paid. Non-Brand Terms Keywords that do not contain either the marketer s company name or products specific to that company. Non-Brand Terms examples include: electronics, printer, photo printer, etc. Organic Search Unpaid or Natural Search listings that do not have media costs associated with them. Paid Search Paid ads or Pay-Per- Click (PPC) search listings that carry direct media costs. SEO Search Engine Optimization, another term for referencing Organic Search. SERP Search Engines Results Page, or the page that shows the listings for each keyword search. Visits Website traffic originating from either Organic or Paid Search. Also referred to as Clicks. 11

12 ABOUT RESOLUTION MEDIA Resolution Media, an Omnicom Media Group company, is one of the largest search agencies in the world. The company manages more than $1.2B in media investments, with more than 500 specialists in 60+ offices worldwide. Resolution s international network delivers digitally-integrated, full-service solutions in the areas of search, social, local, mobile, behavioral and content marketing. Resolution leverages the power of technology, data and the agility of real-time media marketplaces to target empowered consumers today and as they change tomorrow. Resolution helps brands better understand consumer behaviors, interests and intent, and turn these insights into smart, ROI producing actions that keep them in front of empowered consumers across media, content and devices quickly and consistently. For more information, please visit ABOUT KENSHOO Kenshoo is a digital marketing technology company that engineers premium solutions for search marketing, social media and online advertising. Brands, agencies and developers use Kenshoo Enterprise, Kenshoo Social, Kenshoo Local and Kenshoo SmartPath to direct more than $25 billion in annual client sales revenue. The Kenshoo platform delivers Infinite Optimization through closed-loop targeting, universal integration, and dynamic attribution. Kenshoo s adaptive technology, proven algorithms, and unmatched scale power campaigns in more than 190 countries for nearly half of the Fortune 50 and all 10 top global ad agency networks. Kenshoo clients include CareerBuilder, Expedia, Facebook, KAYAK, irep, John Lewis, Resolution Media, Sears, Tesco, Travelocity, Walgreens, and Zappos. Kenshoo has 16 international locations and is backed by Sequoia Capital, Arts Alliance and Tenaya Capital. Please visit for more information. Resolution Media and Kenshoo brand and product names are trademarks of Resolution Media, Inc. and Kenshoo Ltd. Other company and brand names may be trademarks of their respective owners. CONTACT Viji Davis Vice President of Marketing Resolution Media Josh Dreller Director of Marketing Research Kenshoo 12

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