Whoever owns the organic results can set the price on Google Ads. One detail many have missed in the search results is what it actually means to own different areas of the search results page. If you’re crushing it in Google Ads, you’ll drive a lot of high-quality traffic — but if you also dominate the top organic results, you can force your competitor to pay more than they can afford.
There are a number of factors that interact to create a very specific situation on the search results page. One aspect is that those who perform well in both the ads section and the organic results tend to get more clicks on both. Maybe it’s the recognition factor, or maybe it’s the trust-building effect of appearing in both places — but it definitely has an impact. If you hold the top organic position and also appear above the results in the ads, you’ll have a better CTR (click-through rate, the percentage of searches that lead to a click on your ad or your organic result). We all know that better CTR on ads leads to your bids being valued higher.
Another aspect is that in many segments, Google is the real growth engine. It’s in the search results that businesses in these segments are built, and here there’s a very important difference between SEO and SEM. Those who succeed with SEO and maintain the top organic results don’t face accelerating costs when the number of clicks starts to increase quickly. If you’re good at Google Ads and clicks skyrocket, your costs will also skyrocket (even if the cost per click decreases).
Organic margins beat paid margins
The big effect of this is that those who hold the top organic position have a huge advantage over those who only excel in Google Ads. The cost per sale will steadily be lower in the long run for the SEO investment. Of course, you can push down CPA with Ads as well, but only to a certain point — Google won’t let go of its share of the revenue (you can see this in the fact that Google’s earnings aren’t dropping rapidly). The combination of getting a slightly better CTR by appearing in both results, and at the same time having a much more profitable “ad” in the same search results, means that over time you can afford to bid more on Ads than your competitor — and still remain profitable.
Of course, many other factors come into play — product margins, whether you have capital backing, and so on. All else being equal, however, those who appear in both results have a serious advantage. And the slightly more cunning competitor realizes they can then push bids higher in Ads, driving up prices across the entire segment in a way that makes it unprofitable for the competition. You have the opportunity to set the price on Google Ads in a way others simply can’t.
Magnus Bråth
Consultant & Adviser
Magnus is one of the world's most prominent search marketing specialists and primarily works with management and strategy at his agency Brath AB.