Sales Column: Paul Allen

 

Do or Die - Search Engine Marketing 

 

For many online businesses, search engine marketing is a great way to reach new customers. Search engine marketing can mean the difference between life and death for your company. There are two basic categories of search engine marketing: 1) Pay-Per-Click Advertising; and 2) Search Engine Optimization (SEO).

 

Pay-Per-Click Advertising

Virtually every major search engine has adopted the pay-per-click advertising model and it's easy to do. In about 15 minutes, you can set up a campaign on Google and bid on keywords that relate to your business. It's one of the great pleasures of modern-day advertising. Search engines give you instant results and excellent measurability. Internet users perform billions of searches each month on search engines and advertisers can insert "paid results" whenever their keywords are searched for.

Overture provides a tool on its Web site (inventory.overture.com) that shows you how many people searched for any given keyword last month. It's a treasure map for online marketers.

Sadly, most companies still don't use these services. Google currently has approximately 280,000 advertisers. The San Francisco Chronicle reported that Google estimates this figure will grow to more than 652,000 advertisers by 2008.

If you aren't doing pay-per-click search engine marketing, you are losing customers every day to businesses that are.

 

Search Engine Optimization (SEO)

But of even greater importance for your long-term profitability, is SEO.

SEO is the art of making sure your Web site comes up in the top 10 results for keywords that matter to you.

Why is this so important?

Because most people using search engines skip the "sponsored listings" (the paid ads) and click on the "natural" search results - the sites that Google or Yahoo believes are most relevant to the search that was performed.

One local company's Web site ranks in the top 10 on dozens of important keywords. This company generates millions in business each year at no incremental cost.

For this company, SEO is like getting a free yellow pages ad in every phone book in the country. However, most companies that I talk to get little or no natural traffic from search engines. Their Web sites just don't show up after a keyword search.

Using typical e-commerce numbers, I've created two hypothetical companies to demonstrate how SEO can make or break a business.

Company A and Company B sell fabric online. Both convert 2 percent of their Web site visitors to buyers. The average order size is $100. Both have an 80 percent gross profit margin. (OK, so I don't know the textile industry.) Both need $40,000 in gross margin to break even.

Both companies bid for traffic on dozens of fabric-related keywords, paying an average of $1 per click. Company A has no natural search engine rankings. Company B ranks No. 1 on Google for the keyword "fabric."

How will these companies fare?

Company A pays $1,000 each day to get 1,000 visitors from search engines. This generates 20 sales per day or $2,000 in revenue. After cost of goods and advertising expenses, the company nets only $600 per day, or $18,000 per month. (Remember it needs $40,000 per month to stay alive.) Since there is no bubble to sustain it, Company A will die without repeat orders from existing customers.

Company B would generate the same $60,000 in revenue and a $22,000 net loss each month if it relied only on pay-per-click marketing. But remember its No. 1 Google ranking on "fabric."

My research shows that in the U.S. the keyword "fabric" is searched for more than 30,000 times per day. If 25 percent of these searches generate a visit to Company B's Web site, it will bring in an extra 7,500 more visitors per day. At a 2 percent conversion rate, this results in an additional 150 orders, or a whopping $15,000 per day in added revenue.

Company B's monthly revenue is $510,000, enough to grow the business and hire new employees, including a break room musician to entertain the other employees - maybe we'll call him the famous Boogie-Woogie Bugle Boy of Company B.

Will one company die and another thrive because of differences in natural search engine rankings? Yes. That's the power of search engine marketing. Is this power working for you?

 

Paul Allen started Infobases, MyFamily.com, and 10x Marketing. He currently runs the business incubator Provo Labs. He has taught at UVSC and BYU and he blogs at www.paulallen.net.