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Well, SEO/SEM is a part of digital advertising. You can allocate separate budget for SEO/SEM to increase the leads. SEO will bring you long term lead generation compare to SEM (PPC). If industry have potential to get leads from Search Engines then definetly SEO/SEM budget will help.
spend it as you like. if you want more relevant answer then let us know your product/service, country, segmentation criteria and purpose of that marketing campaign i.e. awareness or conversions.
Here's the answer as per the objectives you keep in mind:
1. Sales/Visits/Traffic to website - Google is the best way. SME, SEO, PPC
2. Brand awareness/community building - Social Media
Ideally, your budget should be split between these two. Spending100% on only1 may not be a good idea.
spend at the best way serve your goals
Regards
"Is it better to spend your digital advertising budget on SEO/SEM or social media?"
This question require a component that you've missed out, i.e., what's your objective ?
If you talk about Digital Advertising Budget, it is not only Search or Social. It include a plethora of digital offering wherein you can advertise. But here I disagree with @Alaa with the statement "You usually spend on advertising to reach users you cannot reach them through organic traffic sources" as it is imperative that you do a mixed spend. If your budget is very low and you are very much concerned about the ROI, then its Search & Email only but if your budget has room for play, there's a playground out there. Starting from email, search, social, rich media, display media, mobile, affiliate network, etc etc.
Here do a research on where your target audience is and taget those mediums which reaches your audience is the most effective way.
Yes of course, SEO/SEM will drive traffic to your website, hence increasing the reach and visibility; social media helps in viral campaign.
Digital Advertising budget isnt about SEO/SMO even there is a relation, but they are different activities.
You usually spend on advertising to reach users you cannot reach them through organic traffic sources (alternatively, you cannot reach them through SEO activities), or to emphasize your presense on Search results and social media.
My advice is to allocate a budget for SEO/SMO, and to allocate advertising spents on direct aquisicions or leads, with a flexible budget that is moving side by side with the ROI, if the $ you spend bring you profit, spend more until you reach the breakeven point.
If your spending for the branding purposes, try to find some way to estimate your branding costs outcomes also.
Finally, do all the mentioned activities in parallel, again its not this or that, its this and that here!
It depends on what your goals are. It could be the growth of the fan/follower base, promotion of a product/campaign/service, spreading the word, driving sales/leads/downloads, etc. You then split your budget based upon your requirements.
SEO is a long-term process that takes time before it starts delivering the results, where as Social Media and Adwords can derive quicker results. SEO & Social can also be used in the long run for brand building