"Search Marketing Trends: Back to Basics," suggests that growth will decline for paid search from 15.9% in 2009 to 11.3% in 2013--while SEO growth will jump from 17.7% to 20.3%, respectively. (see full report)
When local brick and mortar florists inquiry with me on how much I charge to SEO their site, the first place I go is Google's Traffic Estimator to help me get a value read on what would be their most primary keyword combination for their area. In every case, my cost is pennies compared to what the PPC is running for that same phrase (which is of course tallied from competitive bids).
While most SEOs price based on full court optimization, my pricing for local florists is based on a keyword basis (which is priced against search volume and competition levels) because I know that full court optimization FOR THE LOCAL FLORIST (only) is not worth the cost. Other SEOs may think I'm crazy in saying that, but it is true for the local florist industry. How do I know that? Because I am a real-florist (who is aware of real-florist budgets) with SEO knowledge.
For instance, if you had a shop in say Houston Tx....why pay an SEO for a full court SEO job to rank your website for multiple keywords....which would include keywords like "Houston flower delivery" when only 1 search a day is performed on that phrase; or for "Houston funeral flowers" when zilch ("o") searches are performed on it.
It would make much better sense to pay an SEO to focus on ranking your website for just "Houston flowers" as roughly 200 searches are perform on that phrase each and everyday (and price it out according to that search volume). By concentrating on one or two primary keyphrases it keeps the SEO cost down for you, and ultimately pays off in the same way a full court optimization would. After all, you would be ranking for what the bulk of people are actually searching for any way. Of course, if you are in area where you serve multiple large cities (and there is a search volume present), you'd want rank for those cities too.
To give you a better example of a PPC to SEO comparison (which applies to my service only), let's look further at the search term "Houston flowers." Google's Traffic Estimator indicates that it costs an average of $720 - $1,170 a day to rank in the top 3 Sponsored Ads for that particular search. Yes, that's a day!! My cost, $450 a month for a top 5 organic ranking.
If you are in a smaller populated area with less search volume my cost would be that much less. Many of my florist clients are paying as little as $300 a month for search volumes that are averaging 4,500 searches a month. If you are in area where search volumes are even less, my pricing will be priced off the volume of searches for your area.
Any way, that's how it works.
Take your phone book budget and replace it with SEO. There's a reason those books are getting smaller.