Paid Inclusion Beats PPC in Many Markets

  |  October 4, 2004   |  Comments

Paid inclusion is often much cheaper than PPC search ads. Most marketers should use both for maximum ROI.

Paid inclusion (PI) is good food, although too often online marketers wary of paying on a CPC basis for "natural" search traffic overlook it. Yet as pay-per-click (PPC) bids continue to rise, PI looks more and more like a bargain (or, as we say here in Boston, "a baaaahgin").

For those new to search engine marketing (SEM), PI is a structured, automated feed of pages from your Web site directly into Yahoo (the only search engine still offering such a program). The feed ensures your submitted content is included in Yahoo’s index, but there’s no guarantee it will appear in the top positions when someone searches keywords in that content.

With no promise of high rankings, you must still optimize the pages in your feed to ensure they achieve a higher ranking than those of your competitors. If you fail to get on the first SERP or two, you won’t get many clicks.

PI is paid search advertising, but it’s paid search advertising used to populate Yahoo’s natural search results. And Yahoo is second-largest search property, in terms of market share. Marketers should budget for PI just as they do for Google AdWords or Overture’s search ads. The good news is it’s less expensive in many cases.

In fact, PI is surprisingly affordable. These days, it drives a significant volume of qualified traffic at a substantially lower price than traditional PPC advertising. It works better in some online vertical marketplaces than in others, but generally it’s a strong value for our clients.

Consider the example of a real business-to-business (B2B) industrial e-commerce site. Compare a sample of their targeted keywords’ click cost from PI traffic to their cost in PPC advertising. It tells a compelling story, as shown in the table below:

Keyword Overture PPC Ad
Bid, Position 1 ($)
Paid
Inclusion ($)
Savings
($/click)
Keyword 1 3.51 0.25 3.26
Keyword 2 0.68 0.25 0.43
Keyword 3 0.94 0.25 0.69
Keyword 4 0.65 0.25 0.40

Since this company began participating in Yahoo’s PI program, its monthly traffic from Yahoo has increased 4,000 percent. Total PI spend is roughly $1,700 per month, return on investment (ROI) positive.

Impressive and much less expensive than PPC advertising. Yet this company does both PI and search advertising, because both are ROI positive.

Not every user clicks on natural search results, and not every user clicks on paid search ads. "I think there’s an advantage in showing up in the algorithmic search results," said Gary Stein, senior analyst of online advertising and marketing for Jupiter Research (a Jupitermedia Corp. division). "There are way more clicks that go to the algorithmic than the paid search. Our estimates are five out of seven clicks go to the algorithmic, or natural, results."

In Yahoo, research indicates 60 percent of clicks occurred in natural search results, the rest in paid search ads. Companies seeking to maximize returns must be found on both sides of the SERP.

A business-to-consumer (B2C) retailer falls into a different pricing category in Yahoo’s PI program: $0.15 per click, due to a smaller price tag and margin. This explains lower search advertising bids, as seen in the table below:

Keyword Overture PPC Ad
Bid, Position 1 ($)
Paid
Inclusion ($)
Savings
($/click)
Keyword 1 0.14 0.15 -0.01
Keyword 2 0.10 0.15 -0.05
Keyword 3 0.10 0.15 -0.05

In this example, the PI cost exceeds the PPC ad cost, in part because there’s very little competition on many of the keywords. That will change in time. Should this advertiser skip PI? No. Sixty percent of clicks occur in the natural search results; so long as the campaign remains ROI positive, it helps the advertiser’s bottom line.

This advertiser might be wise to take greater advantage of the PPC ad bargain. As with virtually all other keyword marketplaces, even this relatively affordable search advertising real estate is bound to increase over time. PI, while currently at a slight disadvantage to PPC ad pricing, is still competitive. It will likely be viewed as a bargain in six to nine months if PPC costs increase.

Regardless, if this client’s PI spend is ROI positive (and it is), investing in PI increases the overall volume of qualified visitors and conversion on its site. Investing in PI makes sense.

Yahoo traffic increased over 1,500 percent for this online retailer at a cost of around $2,500 per month.

A real-life example of where PI can provide marketers with some leverage is when the cost of participating in PPC auctions spirals out of the stratosphere. In some financial services verticals, keyword bidding is ferociously competitive. Consider bid prices on some financial services keywords, comparing CPC to PI:

Keyword Overture PPC Ad
Bid, Position 1 ($)
Paid
Inclusion ($)
Savings
($/click)
Keyword 1 15.00 0.40 14.60
Keyword 2 15.00 0.40 14.60
Keyword 3 9.01 0.40 8.61

Traffic the PPC auction values as high as $15 per click can be obtained with a PI ranking at a tiny fraction of that price.

PI isn’t a substitute for PPC advertising, nor for optimizing site content, but it is an important part of the online ROI equation. "I believe that paid inclusion should always be considered when formulating your marketing mix," said Charlene Li, a principle analyst of devices, media, and marketing at Forrester Research. "Marketers should never write it off without testing it. However, it’s not the right solution for every marketer."

To search engine purists who argue Yahoo should index sites without requiring marketers to pay for inclusion, I’ll simply point out this is how the world works today. You can curse the wind or adjust your sails. To achieve maximum ROI on an SEM campaign (considering Yahoo’s status as the number-two search player), PI participation can be an important component of your ROI equation.

All forms of paid-search advertising should be included in every SEM campaign so long as they are ROI positive. PI is an often-overlooked but particularly affordable way to increase the volume of qualified visitors to a site, relative to PPC advertising. Don’t overlook it. Make sure you or your SEM vendor manages your PI investment for maximum efficiency and ROI.

Want more search information? ClickZ SEM Archives contain all our search columns, organized by topic.

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ABOUT THE AUTHOR

Fredrick Marckini

Fredrick Marckini is the founder and CEO of iProspect. Established in 1996 as the nation's first SEM-only firm, iProspect provides services that maximize online sales and marketing ROI through natural SEO, PPC advertising management, paid inclusion management, and Web analytics services.

Fredrick is recognized as a leading expert in the field of SEM and has authored three of the SEM industry's most respected books: "Secrets To Achieving Top-10 Positions" (1997), "Achieving Top-10 Rankings in Internet Search Engines" (1998), and "Search Engine Positioning" (2001, considered by most to be the industry bible). Considered a pioneer of SEM, Frederick was named to the Top 100 Marketers 2005 list from "BtoB Magazine."

Fredrick is a frequent speaker at industry conferences around the country, including Search Engine Strategies, ad:tech, Frost & Sullivan, and the eMarketing Association. In addition to ClickZ columns, He has written bylined articles for Search Engine Watch, "BtoB Magazine," "CMO Magazine," and numerous other publications. He has been interviewed and profiled in a variety of media outlets, including "The Wall Street Journal," "BusinessWeek," "The New York Times," "The Washington Post," "Financial Times," "Investor's Business Daily," "Internet Retailer," and National Public Radio.

Fredrick serves on the board for the Ad Club of Boston and was a founding board member of the Search Engine Marketing Professional Organization (SEMPO). He earned a bachelor's degree from Franciscan University in Ohio.

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