Over the years the team at Three Deep has built our SEO and PPC practice from scratch, working with a variety of clients along the way. While always striving to deliver great results for clients, I have come across two certainties that often stop a great SEO program dead in its tracks:

1. Corporations drastically under-invest in SEO
2. This is caused by the myth of “working dollars”

Until we understand the motivations of the people approving marketing budgets and take action, SEO will continue to be underfunded. It’s time for SEOs to unite and fight for the funding we deserve!

Pathetic SEO Investments

We’ve all seen charts like this one, which highlight the growing gap between dollars spent on paid search vs. those spent on SEO. In fact, Rand has been observing this spending gap for years.

Many SEO Bloggers have posted on this topic in the past, but for the most part I have found our opinions and reasoning to be highly tactical and failing to address the true business issue at hand.

As SEOs, our easiest explanation for the rift in spend could be any of the following:

• PPC has concrete metrics and is easier to prove ROI
• Good agencies don’t make SEO result guarantees, so they don’t get as much funding as their PPC brethren
• PPC can be turned on in 15 minutes and you can buy your way to the top!
• SEO can take 6-12 months (or more) to see good results
• PPC can offer a greater sense of certainty to decision makers through accountability of marketing spend and ability to control results

These are all, in fact, true statements and at the core of understanding why there is such a large gap in spending between paid and organic search efforts. However, they do not offer a solution to the problem.

The real reason why SEO is under-invested?

Corporate marketers are so worried about protecting their jobs by showing quarterly performance improvements that they throw their money into programs that have an immediate and easily calculated return. PPC offers this level of security. SEO does not.

We are the 99% or Why We Should Blame Wall Street

Let’s look at two common investment scenarios:

Investment #1

Investment #2

Which investment is a better choice? This isn’t a trick question - the first investment is obviously the better choice. In fact, anyone who chose Investment #2 as the better option would either need to have insider information, be a major risk taker, or might be just plain crazy. The lone positive aspect of Investment #2 is that returns are growing much more quickly than Investment #1.

Investment Year 2

Now let’s move on to year 2 to see how our investments are performing:

Investment #1

Investment #2

After year 2, both investments are looking strong. While Investment #2 has definitely caught up with the first choice, it would still be an inferior investment to Investment #1.

Investment Year 3

It’s not until the third year that we start to see a major switch in the values of these investments.

Investment #1

Investment #2

At the end of year 3, we see a major shift in the value of our investments, with the Investment #1 continuing a modest 10% gain each year, but being completely overshadowed by Investment #2, which now produces a whopping 85% return on investment in just three years.

Clearly, those patient/crazy enough to invest in choice #2 are very happy with their choice.

What The Heck Does this Have to do with SEO?

You may have picked up on it right away, but the investment scenarios outlined above are meant to illustrate the difference between investing in SEO and investing in PPC over time.

In years 1 and 2, there is no doubt that Investment #1 (PPC) is providing the best return on investment and is the clear choice for anyone seeking quality, consistent results.

Investment #1 is modest, reliable and fits right into the risk tolerance of most investors. It delivers returns of consistency only seen by Bernie Madoff’s mainframe computer (sorry, couldn’t resist). Simply put, you can’t go wrong with investing in PPC.

Investing in SEO is a tougher sell, because it is quite possible that the investor will lose money in the first year. In this scenario, it’s quite likely that any company investing in SEO will see little to no return on their investment in the first year, but will begin to see a positive ROI by the time the program hits its 4^th quarter of investment.

Very few marketers will have the patience to invest confidently in SEO until it starts performing exponentially well in year 3.

No Time or Money to Take Risks

Depending on the source, it is reported that the average tenure of a CMO is between 18-36 months. From my experience, the average corporate marketing department will see significant changeover every 18-24 months.

At best, you have a corporate marketers trust for 12 months, six of which are focused on learning to work together and forming a strategy. That leaves six months to actually execute and measure the effects of whatever strategy is recommended. If you do a good job, you get another 12 months to continue to make progress.

Given this scenario, recommendations need to be quick hitting, strategic, and offer some sort of performance guarantee. You may propose a holistic digital media plan that includes display ads, remarketing, mobile, paid and organic search. Each of these tactics will be scrutinized in order to determine which of them will have the most impact in the shortest amount of time. When this happens, SEO is often left out in the cold.

The Working Dollar

Traditional advertisers divide their budget into two buckets:

• Working Dollars - the money paid to media providers for placements, commercials, etc.
• Non-working dollars - the money paid to advertising agencies to create the content being advertised

In an ecosystem where all media must be purchased (think pre-internet days), this model made sense: Every dollar that you paid to your advertising agency was one less 30 second spot in prime time television or advertisement in Times Square.

Magic formulas have been developed in order to ensure that more money went to working dollars (let’s say 80%) than went to the agencies that produced, bought or brokered the media (let’s say 20%). These magic formulas worked well in the days of print, radio, and TV, and are still in use by many advertisers.

Like all models that worked well in the 20^th century, this is not the best model for online advertising. In fact, it’s as archaic as a store exclusively selling DVD’s or books. The Internet media model works completely differently and separates media into three buckets:

• Paid Media
• Owned Media
• Earned Media

We all know what paid media represents, with the online marketing equivalents being money spent on display advertising and paid search.

Owned media represents visitors to company controlled properties (for example, branded website traffic), and is generally regarded as a fixed annuity/expense for an organization.

Earned media is the trickiest concept for companies to grasp, because it represents a departure from the model that has been in place for years. This is because in traditional channels, it was very difficult to earn media and every TV or print appearance came at a price. The openness of the Internet has made earning media possible and more cost effective than buying media traditionally.

SEO is earned media

So What Can SEOs do to Encourage Investment?

Educate.

The biggest thing we can do is to educate corporate marketers on the advantages of online marketing and help them understand how earned media can be their best friend. An educated client is the best type of client.

Be careful, though, because you don’t just need to educate your direct point of contact – you also need to educate several key stakeholders and budget controllers in order to receive proper funding for SEO initiatives.

This may be more difficult than you think, because traditional companies engaged in advertising would much rather pay 80% of their budget to Google as “working dollars” than pay 80% to an agency attempting to earn media for them.

Your biggest breakthrough will come from convincing advertisers that all earned media should be treated as working dollars, even though they are paying more to the agencies than to media companies. Once they get over this mental hurdle, investment in earned media could be astronomical.

Doing More With Less and Paying Forward

Fact: Marketing budgets are going to get cut. When a PPC campaign stops being funded, it simply goes away without a trace, whereas SEO is as close to a permanent piece of the Internet pie that we can expect to see as marketers.

The work SEOs do over the years researching keywords, creating content and building links may continue to draw in visitors for generations to come. Here is an illustration of how our investment scenarios may look different if we stop investing in our programs in year 2.

PPC Investment Only Funded 1 Year

In the PPC scenario where funding is cut, the ROI in year 2 would simply equal that of year one. It's not too hard to see that without funding, all revenue and returns go away.

SEO Investment Only Funded 1 Year

Now the SEO scenario is completely different. Everything that was earned during the first year still draws in visitors and revenue to the website. These efforts continue to grow website traffic without spending any money on developing new content. By cutting their SEO budget, the company in this scenario doesn’t lose revenue. In fact, their revenue will likely grow each quarter while all of their SEO work in year 1 takes hold. Their ROI also skyrockets.

SEO becomes an annuity for anyone brave enough to invest in the process upfront. A single year investment can continue to pay dividends for years to come!

Closing the Gap

It will not be easy to bring SEO investment to the same levels as what is invested in PPC on an annual basis. We are working against shortsighted thinking and traditional media models, yet we don’t have the tools or confidence to make performance guarantees.

With that said, by understanding the motivations of corporate clients, we can begin to relate to their needs and work to put excellent programs in place. It still may take some selling, but we can start by asking this simple question:

Would you be willing to spend 1 year investing in a program that could be your cash cow for the next four years?

If we can properly educate corporate marketers and align ourselves with their motivations, perhaps we will finally start to close the gap between SEO and PPC spend.

Final Thoughts

My background is equal parts SEO and PPC and I appreciate the challenges that both have to offer. This article is not in any way recommending that companies stop investing in paid search programs. In fact, by showcasing the value of both paid and organic search as investments, I am hopeful that we will start to see more investment being driven to both organic and paid search in the near future.

About the Author:

Jeff Sauer (@jeffsauer) is a Partner at Three Deep Marketing in St. Paul, MN and is Vice President of Three Deep’s Crossfuse Lead Generation Platform. He created his first website in the 8^th grade and is passionate about paid and organic search, Google Analytics and online lead generation. He also serves on the board of directors for MIMA, the Minnesota Interactive Marketing Association and MnSearch, the Minnesota Search Engine Marketing Association. This is Jeff’s first post for SEOmoz.