Risk in PPC vs. social media marketing

Dangers of PPC vs. social media marketing
There’s an argument that’s been circulating in social media marketing circles about how “dangerous” it can be for marketers to rely on pay-per-click (PPC) advertising, as compared to more organic ways of building traffic.

You know, social media doesn’t have to be positioned as the destructor of advertising to justify its existence.

The gist of the argument: a deep-pocketed competitor can come along anytime, say flush with VC cash, and outspend you. One day you were at the top of the sponsored links, bidding some reasonable CPC — and then suddenly you’re shoved down the list. Addy Warbucks is bidding CPC’s in the stratosphere. There’s no way that can be profitable for them, it’s just sheer irrationality. Yet you’re suffering for their recklessness. You either have to live with your lower ranking or jack up your bids beyond what you think is reasonable.

The implication: social media marketing is safe from this kind of irrationality. If you want a defensible way to win customers, invest in social media instead of advertising.

I’d like to offer up a counterpoint.

First, is this a real risk? I’m a tad skeptical. Since there are generally 11 page-one slots in a typical search keyword auction, and the inherent difference in click-through rates (CTR) between the top slots is not enormous, a single irrational competitor can only do so much.

So they take the 1st slot and you take the 2nd, and in the process you bid strategically so as to make them pay full price for their ridiculous bid. Note: your price for Google ads only depends on the bids of the people below you, not above you, so your price is not affected. Let them burn through that capital while you keep your optimized net CPA (cost-per-acquisition) and comparable CTR.

One bidder doesn’t change the whole game in sponsored search. It would take a whole group of cash-rich, irrational bidders to knock you out of the running. And then, if there are really that many other players at higher CPC bids, can you write them all off as “irrational?” After all, despite the amusing stereotype, I’d wager that most VCs and funded entrepreneurs have incentives to behave rationally. Aggressive, yes. Irrational, no. There’s a difference between those two adjectives.

However, for sake of debate, let’s put that aside.

Let’s assume that, yes, PPC has the risk that a marauding herd of super-rich lunatics can bid you off the island of your favorite keywords at any moment.

I contend: social media marketing suffers from the same risk.

If I’ve got a boatload of money and I want to own the top organic search engine results (SERP) for a particular keyword, there are a wealth of tactics I can employ my capital towards to achieve that goal. I can’t buy links directly — well, I can, but that’s black-hat, not a stable strategy because if Google catches you, they will punish you harshly.

But I can buy links indirectly:

  • hire a research firm to crank out original reports relevant to the keyword, study after study, and then promote them free online (“link if you like!”);
  • hire a group of super-coders to develop cool web or iPhone/Android applications that are relevant to the keyword and make them available free with ways to encourage people to share them and link to them;
  • make a deal with a celebrity in the industry (or in the pop culture scene where appropriate) to participate in a blog or video blog series, again promoted to generate links;
  • hire lots of talented people to blog, tweet, comment, and fan-page relevant content, all attributed to the company — note, I’m not suggesting spam but rather a flood of real content, the sort of real content you’d produce if you could afford to hire a platoon of really great social media mavens;
  • reward your social media “supporters” with a private invite-only concert by Weezer or whatnot, encouraging lots of blogosphere and Twitter buzz;
  • launch a conference or independent organization around the keyword topic to further generate organic interlinked content in the desired keyword space;
  • contract with great writers to publish books on the topics of your main keyword space, promote with free copies, leverage Amazon’s PageRank positioning to your benefit;

And so on.

The irrational competitor’s strategy: overspend on as many of these tactics as necessary to build up a tremendous amount of link juice and subscribers and followers, and then leverage the bejesus out of that base for the promotion of all future content. Again, I’m not talking about anything black-hat — this is just about spending your way to the top, buying socially exciting content and content-making capability.

Specifically spending more than is rational on these tactics.

If you were rationally trying to build your social media marketing presence in the face of such an onslaught, you could very easily be swamped out of the picture.

You might argue that overspending on social media is a harder, more expensive proposition than doing the same with PPC. Perhaps. But the consequences also have greater longevity. PageRank sticks around a heck of a lot longer than the top slot in the sponsored links box. With PPC, as soon as you shut off the money, Google shuts off the ads. But organic listings persist into the future.

Also, a single competitor can generally only win one ad slot on a page — but if they’re clever and aggressive in their social media strategy, they can acquire multiple organic links on page one of the SERP. One competitor can conceivably push you off the page entirely, if they set their cost-is-no-objective sights on it.

I rest my case: it’s not true that PPC advertising has an “irrational spender risk” and social media marketing doesn’t.

They both have that risk. Although that’s probably not the top risk that people should be worrying about in either case.

To be clear, I’m certainly not advocating that you should do advertising instead of social media marketing. Rather, I believe that they are both components of a healthy digital marketing strategy, and that you should invest in each relative to their ROI for your business.

If PPC advertising can give you great return, use it. If blogging, tweeting, and Facebook’ing can give you great return, use it. Invest in each to the degree it makes economic sense. They’re not mutually exclusive. To the contrary, they can actually be quite synergistic… but that’s a post for another day.

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