SEO by itself carries a lot of risk, a lack of easily monitored metrics and a general lack of certainty. SEO success is at the whim of Google. Whether it works or not will vary massively based on link building strategy, link quality, link velocity, on-page factors, your niche, your selected keywords and your ability to keep up and adapt to the monthly updates that Google tends to make.
The situations that you want to avoid include using the wrong strategy and be penalized for that or using a sound strategy but picking the wrong (non-profitable) keywords.
On the other hand, AdWords, whilst generally "more expensive" is inherently less risky. You can track it daily, pull out reports daily, rapidly turn keywords on/off etc. In other words, AdWords is a great way to "test" and "prove" that certain keywords have potential for profitability before going down the uncertain path of running a successful SEO campaign.
As a general rule, if a keyword in Adwords drives sales and/or leads (conversions), then it is safe to assume that an SEO campaign will help you to "win more" and scale up those results by an order of magnitude.
This approach of using both Adwords and SEO also encourages businesses and agencies to focus not just on vanity rankings but also on conversion rate and getting the fundamentals right.
I am a Cambridge University Honours graduate with postgraduate business qualifications. I am also a qualified Secondary School Teacher having taught at schools including Melbourne Grammar School and Scotch College in Perth. Married with 4 kids, I am a cricket tragic. I love business, marketing, advertising, music, playing guitar and singing. My music can be found here http://soundcloud.com/plopconsortium/sets/tunes My linkedin profile can be found here: http://www.linkedin.com/in/davidprice2
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James Norquay, SEO Director at Prosperity Media
It depends what market you are in, I have clients who work in markets where the CPC with Adwords is 50-100 dollars a click. So why would they blow thousands on PPC when you they use SEO to have higher tier ROI. I agree in some markets you are 100% worth doing PPC and SEO where the CPC is fair to the customer, yet in other markets you need multi million dollar budgets to keep your head above water. Any any one who does correct white hat SEO in line with the Google guidelines should not be worried at all, it is the ones who are doing low quality spam which are the problem.
Bridget Holland, Director at NoBull Marketing
It's interesting that people often talk about using Adwords to help identify good keywords for SEO, but you don't hear so much about using (on-page) SEO techniques to get your website well set up for Adwords. For example, the simple question of 'what is the main keyword for this page?' can highlight that you have more than one product or service or issue or industry being addressed on one page, and that maybe you should separate them out. I've seen Adwords campaigns where this didn't happen. So for example, if you have a page about motorbike accessories where everything above the fold is helmets, then come gloves, then come boots, 'motorbike boots' might be a really good keyword for your business, but everyone who clicks through to the page is going to see nothing but helmets and leave. The 'SEO thinking' of a master accessories page with subpages for helmets, gloves and boots, implemented in advance of Adwords, would probably have given better results! So for me, Adwords and SEO tend to work together - but which one requires how much attention at any time depends on your industry, your budget (time and money), the state of your website, how urgently you need results etc...