Does Paid Search or SEO impact EPS more?

Show Notes

  • ? 02:38
    How Searchmetrics looked at paid visibility and its impact on Earnings per Share (EPS)
    ? 04:13 -Why there is an indication that paid high visibility results in negative impact to EPS


  • “You did a study that looked at what the impact of SEO has on EPS but you also did some analysisto compare SEOs impact on EPS with paid visibility and also the CMOs tenure. Yesterday we talked about the correlation between SEO and EPS although it was a little inconclusive and if we refine the data and we get a little less statistically significantthen it starts to look like SEO and EPS are pretty dang correlated. We are actually starting to refine by industries and take them on a near-term time frame.” -Ben

  • “We used the same methodology that weve listed before. So, the same 62 Fortune 500 companies from 2014 to 2019 and looking at a correlation between paid visibility and EPS, we found a relatively weak, negative correlation there.” -Melanie

  • “It is saying r equals negative .67, what this means is as paid visibility is increasing, average EPS is decreasing and vice versa. But again we are already talking about limitations to correlations is not equal causation and this doesnt technically mean our criteria of having the negative .8 for what we would consider significant.” -Melanie

  • “Alright, so what we heard is when we looked at the datasets from these companies with SEO, we see a mild positive correlation. Companies that have a strong presence that is organic through Google have strong EPS or at least slightly correlated.” -Ben

  • “On the flip side with paid visibility, when somebody has high paid visibility their EPS goes down. I have a philosophy on why this might be true.” -Ben

  • “When there is a high paid effort by the brand, the driver here is obviously cost. The reality is many brands struggle with effectively finding good margin in paid search investments. A retail in e-commerce is a dangerously thin margin channel and so the reality here is that there is definitely some impact to spend.” -Jordan

  • “Maybe I could put this lightly also, maybe people who frivolously spend their money in paid search are also doing so in other marketing channels and there may be a tendency to just overspend as a whole.” -Jordan

  • “At the end of the day, there are two factors I would describe. The first is, it is much more expensive obviously to gain visibility via paid. Thats the first thing. The second thing is, you are chasing this diminishing returns curve. In other words, you have to keep spending those paid dollars.” -Doug

  • “By the way this is not paid is evil and SEO is good conversation. It just simply is describing if there is a heavy dependency on paid and not enough dependency on SEO. I think Jordan nailed it that your marketing mix is much more expensive than it should be.” -Doug

  • “The other piece is, when youre spending on paid, it typically doesnt take as long to get the channel mix right and it typically doesnt take that long really to amplify and scale that. “The challenge is once you turn that off, or if you arent continuing to pay, or chase the point of diminishing returns, at some point youve got a gap. I agree with Jordan, I think theres probably a correlation as well toorganizations that are dependent on one expensive channel tending to be, or dependent on others.” -Doug

  • “These were the same companies that we looked at for our SEO visibility versus EPS correlation. There was a wide variety of industries and one thingthey have in common is the strong e-commerce component.” -Melanie

  • “What we are talking about is a correlation for large companies, Fortune 500 companies that have likely large budgets and they are at the point of maturity to be that large and they havelarge marketing teams. My thought on this is, if you have a high paid visibility in search as a Fortune 500 company, you are likely relying on lots of paid marketing.” -Ben

  • “I think that there is a likelihood that if you are investing in creating high paid visibility in search, youre likely investing in paying for other channels which means that you probably have not invested in driving organic and viral marketing channels.” -Ben

  • “To me, as a Fortune 500 company if you have truly high visibility, youare probably overspending. Thats what I would guess is happening with this data. But I do think its important to think about that from the perspective of Fortune 500 companies with high paid visibility.” -Ben

  • “Its different from growth companies, ifyou are a small company and you are trying to grow quickly, not efficiently, its a different ball game. You can rely more on paid. EPS is often impacted not only by volume but also by efficiency.” -Ben

  • “We are on the edge of strong negative correlation. I think we need to dig deeper into the data, certainly. Especially when you have razor thin margins that Jordan spoke to, your ability to get products in front of people cheaply is half the battle for using paid, thats the challenge.” -Doug

  • “Theres no question here that the principles of managing e-commerce and retail business are ever-present in this data. I would caution us here though because again, were looking at one very specific channel with a very small set of companies and I wouldnt take this for the folks who are listening and their paid search marketers. I wouldnt take this to stop investing in paid search.” -Jordan

  • “Dont become overly reliant on performance marketing, not just paid search but any sort of performance marketing because if you invest all of your efforts in that while you might have short-term positive business impact, over the long-term and were looking at a 6-year period, whats going to happen is like its the heroin of marketing. I would say its the sugar of marketing and you need to eat your broccoli. You need to build your foundation which is your organic traffic and your virality.” -Ben

  • “We do have to be cautious. We are looking at one channel and looking at a small sample size. We are guessing, we are pontificating that the reason why there is a potentially negative correlation for paid visibility is because that is an indication of CMO overspending.” -Ben

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