PPC Management and Why Pareto Isn’t Always Right

If you’ve ever read a single book on business, you’ve probably read about the Pareto Principle. Pareto was an old Italian guy who discovered in his garden that 80% of his peas produced only 20% of the crop, and the remaining 20% of his peas generated 80% of his crop. This proportion, known as the “Pareto Principle” or the 80/20 law, has been extended into the business world: 20% of your clients generate 80% of your business, and another 20% of your clients generate 80% of your headaches and complaints, and so on.

The Pareto Principle had a huge bump in popularity a few years ago when Google released a study that pointed out that of all the money spent on search engine marketing, roughly 20% was spent on SEO and roughly 80% was spent on Pay Per Click marketing — but SEO produced 80% of all search volume and PPC produced only 20%. It looks like a clear case of Pareto: SEO is way more efficient than PPC and PPC should probably be avoided.

The problem is that it’s wrong. The study that Google did is correct in it’s numbers, but those numbers don’t take the entire zeitgeist into account.

80% of search volume is not the same thing as 80% of business traffic. Most searches on Google aren’t business searches — but every search on Google counts toward the traffic statistics. I’m only on my second hour of work today, and I’ve already Googled up two separate XKCD panels, facts on Mallorca for a client, and seventeen separate searches trying to find a killer suggestion to email to my wife for dinner. One of those was a business search, and even that one wasn’t ever going to result in a sale because I’m not a customer. On the other hand, because PPC links are created with an advertisement, you can be assured that much closer to 100% of that 20% of PPC links is actual business traffic.

There are also other elements of SEO vs. PPC that swing the picture back into the realm of PPC — like the fact that PPC traffic purchases products from you before you have to pay for the click in the first place, making PPC excellent for cashflow. The point is, if you have to choose between hiring an organic SEO company and a PPC management firm, the choice is probably a lot less black and white than either one wants you to believe.