SEO vs. SEM: Which Has The Best ROI?

When people say “SEM”, they’re usually referring to PPC via Google Ads. This is where you pay to show up at the top of the search results for certain queries or pay Google to show display ads on relevant sites.

Broadly, SEM stands for Search Engine Marketing, which is why there’s so much confusion around what the difference between SEO and SEM really is.

Technically, Search Engine Marketing is a broad category that contains both SEO and PPC.

If you pursue SEM, that means you are investing in both paid and organic search. That’s an important distinction to understand because when people are wondering about SEM vs. SEO, they are really trying to decide between investing in SEO and PPC.

So, with that in mind, PPC is when you pay Google to get clicks and SEO is when your website shows ups in the organic search results without payment to Google.

With SEO you don’t pay Google, but you’re technically paying (either for someone to do it for you or the time to do it yourself) to get your site ranking.

On a super basic level, you achieve organic rankings in Google by making sure your site is crawlable, indexable, has great keyword-driven content, and has quality backlinks from other sites (more on what these mean in terms of costs in a minute).

PPC and SEO are very similar because they mostly happen in the same environment — the search engine results pages (outside of display advertising).

For any given keyword, you can rank organically (SEO) and also pay to show up at the top of the results in the ad section (PPC). This gives you 2 spots on the first page.

Another main similarity is how both SEO and PPC happen.

Outside of display ads, both types of search engine marketing target specific keyword phrases.

You either pay to show up for a specific keyword your target customers search in Google (PPC) or you work to show up in the organic results for that keyword (SEO). But both are keyword-driven for the most part.

Outside of where and how SEO and PPC happen, they’re also very similar in that both have a superpower other forms of marketing don’t have…

When someone searches “SEO vs. SEM” for instance, you know they’re considering both channels and looking for advice on which one to pursue.

Or if they search “black leather shoes”, you know exactly what they’re looking for.

Whereas with other forms of advertising like Facebook ads, you are only able to target interests (like people interested in SEO and SEM … or black leather shoes).

This may seem like an insignificant difference on the surface, but the intent behind both SEO and PPC often leads to higher conversion rates. When someone types in “buy a twin-sized mattress”, you know what they want and how soon they want it.

And that gives you the ability to reach them when they are closer to a purchase decision.

One of the most dramatic differences between SEO and PPC is how long it takes to see results.

PPC is immediate.

You get clicks pretty much instantly and keep getting them as long as you pay. There are obviously tons of factors that influence how profitable those clicks are for you (like settings, ad copy, target keywords, your landing pages, and your offer) but you will get immediate feedback.

SEO is a long-term investment.

Depending on your budget and the competition in your industry, it can take anywhere from 3-12+ months to start ranking for valuable keywords.

And nothing is guaranteed.

Without a rock-solid SEO plan and sound execution, you may never generate the kind of results you’re hoping for.

That’s very nerve-racking for some, but the upside is so much better than PPC that it’s usually well worth the risk. More on this in a minute.

Generally, PPC costs just about as much as you want it to and SEO will require a more substantial upfront investment.

With PPC, you set a daily budget and get clicks. As long as your bids and budget are enough to outbid your competitors, you can really invest as much or as little as you want.

With SEO, it’s unclear just how much you’ll have to spend to start seeing results.

At the most basic level, you have to:

Sounds expensive, right?

It can be.

And the only semi-accurate way to predict how much work and investment it’ll take to rank for your target keywords is to compare yourself with the current sites ranking for them.

I’ve built sites from scratch with less than $1,000 that started ranking and generating revenue within 3 months.

I’ve also seen businesses in highly competitive spaces spend upwards of $30,000 before they start seeing significant results.

A good rule of thumb for SEO investment cost for an established SaaS, B2B, or eCommerce business is a minimum of $10k for a few months of work and then an ongoing retainer between $2k-$5k depending on what services are provided.

Why would someone pay so much for SEO when it’s nearly impossible to accurately predict investment cost and when you’ll see results?

Keep reading–the answer is powerful.

Determining your ROI (Return On Investment) on PPC is straightforward if you have tracking set up properly. The formula is simply:

And you can calculate this daily.

When done well, PPC can generate a 200% ROI according to studies.

That means a $1 spend gets you $2 in return. Very solid.

But there’s a cap on how much ROI you can generate with PPC 99% of the time. Some businesses get completely ridiculous ROI (like 1,000%+) but most will only see 200% at best.

So, it’s not incredibly scalable.

What about SEO? The formula is similar:

The main difference is you’ll have upfront costs to factor in and you MUST have tracking set up properly through a tool like Google Analytics.

You’re likely going to be several thousand dollars in the hole (either in cash or hours) before you start generating money from your SEO campaign.

So SEO ROI needs to be calculated in longer timeframes initially. Usually, this will be 6-12 months.

That way you can take into account the total cost of SEO, the time it takes to rank, and the data that starts rolling in.

But even then, this formula isn’t perfect. It doesn’t take into account the future gains you’ll receive from your SEO efforts.

Here’s an example:

Let’s say you spent $20,000 on SEO for 6 months, which resulted in the equivalent of $5,000 in monthly traffic value (how much you’d have to pay for the same traffic via PPC).

If you stop investing in SEO, you will continue getting that monthly traffic. Sure, it likely will dwindle if you aren’t focusing on SEO anymore, but the ROI continues coming.

So after another 6 months – all things the same for this example – your new formula will look like this:

$20,000 SEO investment - $30,000 in monthly traffic value (plus any gains in the first 6 months) = $10,000+ in SEO ROI.

(Note: you don’t have to use est traffic value, you can use lead value, sales, or whatever else you can track.)

Carry that into the future, even with attrition, and you’re getting a better ROI by the month.

That’s why SEO is so powerful and people are willing to invest in it despite how unclear it can be from the outset.

There are clients I’ve worked with that have gotten up to $70k/month in traffic value from SEO while my fee remained the same.

The returns you generate can exponentially grow past your costs.

There are several different reports on the ROI % you can expect from SEO, but as I mention in my post on whether or not SEO is worth it, studies estimate that the average ROI is 275% - 1,220% (so $1 invested returns between $2.75 and $12.20).

This is a fantastic question because, at this point, you’re probably very excited about both channels. And you should be.

But depending on your situation, you might be better off focusing on one over the other.

And that’s what I’ll help you navigate here. Don’t take these as hard-and-fast recommendations because this is such a nuanced decision, but these are general guidelines that can help you:

Content-driven businesses like bloggers, coaches, consultants, and online course businesses are often better off focusing on SEO instead of PPC.

They can rank for informational queries (like “how to write a book”) their target audience search on Google and drive new customers to their site every month from their rankings.

And this traffic comes at an exponentially better cost as time goes on.

If they were to focus on PPC instead their costs would rise with their traffic.

Another reason to focus on SEO only is if you have a low budget and can perform the SEO tasks yourself.

PPC requires money for traffic, but SEO requires mostly time if you can do technical SEO, content writing, and link building yourself.

E-commerce businesses in competitive spaces are usually better off focusing on PPC.

High-traffic purchase intent keywords (like “Nike Airmax Men's”) can be incredibly difficult to rank for organically, and people often click the ads anyway even if you manage to rank.

If you have a consistent budget, you can pay to get clicks and sales much more efficiently through PPC.

That being said, there are tons of low-competition purchase intent keywords e-commerce sites can rank for with product and product category pages, so it’s important to understand the SEO landscape in your industry.

The main reason to focus on SEM (both SEO and PPC) is if you have the resources to do so.

If you have the team and the budget, SEM will get better results than one tactic by itself.

I know several consultants who now do SEM instead of just SEO and they now have more real estate on the SERPs for their target keywords.

SEO vs. SEM is a huge decision to make.

You only have so many resources at your disposal, and you need to make sure whatever you invest in will get you the best ROI possible.

So, take your time and carefully consider your options.

Think through your budget, team resources, and cost structure and you’ll be in a great position to make the best decision for your business.