Only 28 percent of Fortune 500 companies had any real presence in natural search, says a new study by Conductor.

$10 billion annually is spent on search-engine marketing, but Conductor believes that most Fortune 500 companies are spending too much money on the wrong strategy, paid search.

Natural search is the more difficult to leverage. While it is easier to gain immediate results with paid search, natural search has a longer tail. It must also be maintained more than paid search. But the prospective ROI of natural search is higher.

Studies show that almost 80 percent search activity is natural search, but only 11% of search marketing budgets are allotted to natural search. “So while most search engine users continue to ignore the paid listings and click away in the natural results, many large organizations have been unable to leverage this largely untapped market,” says the report.

On an A-F scale (A = keywords showing up in top 30 search results; B = 30-50; C = 50-7f; D = 75-100; F = did not show up in the top 100 search results), 0 percent of the Fortune 500 companies graded in the A range, and only 8 percent graded A-C. An overwhelming 72 percent received an F.

The top spots are important.  A 2007 heat-mapping study by market research company De Vos & Jansen found that, on average, searchers scanned on average 9.2 results before the first click. “A high position in the search results also creates trust and suggests to the respondents that the information is recent” (pdf).  While 95 percent of searchers scanned paid search results at the top of the screen, only 31 percent scanned those on the right of the screen.

Conductor believes that the reason for the natural-search failings is because of the difficulty in finding the right keywords, that natural search relies more on the long tail than paid search, and that companies are loathe to allocate to their search budget on top of paid search.

Studies indicate that natural search generates more traffic than paid search, and there is a correlation between educational level and results: the percentage of users who use natural search results in lieu of paid search rises with degree level. They also have higher conversion rates than paid search.

Source: L’Atelier US