How to calculate whether an investment in SEO will bring a positive return on investment.
When speaking with prospective SEO clients, there's one reoccurring question: "Is SEO right for my business?"
The easy and quick answer is "Yes…of course! It's the best investment you could ever make in your business!"
But, if we take a moment to peel back the hype and look at the underlying business implications, perhaps it's not.
Yes, I'm hardcore about the value of SEO. But, there are factors that you must consider before jumping in.
For some companies, SEO is the "We've gotta get someone to handle this SEO thing…hire someone, an agency or in-house employee, pronto," with little thought as to process, effort, timing, and business case for making the investment.
Case Studies From This Past Week
So, I was approached by a company that operates a number of large websites. It happens to have an issue with many of its websites sharing content, and other signals that inhibit the company's ability to "own" their industry as much as they want. Initially, the thought was, "we need to get someone to take on this SEO thing." When we hosted a conference call, including IT/developer folks, copywriters, and others who might be involved in the process, it became clear that some things that must be done to help them succeed and "dominate their industry" may not be possible, at least in the interim.
They soon realized the commitment of SEO. It's not just a commitment to hiring the right agency. It's often a commitment that involves changing the way that your company is structured on the Web. It's a commitment to creating unique and resourceful websites that the search engines will "naturally" want to rank. It's a commitment to unique marketing (social or otherwise) of the Web property to develop authority. It is a commitment of not just the monthly retainer that you might pay to an agency, but also to the time/money that you will be committing to your internal team.
Time to do some math…
I requested access to this prospect's Web analytics. I also asked that they share with me their target CPA (cost per acquisition). I noticed that they had a strong call to action for visitors to call their 800-number. I asked if they had any data that would tell me how many call-in leads they get from organic search traffic. I don't think this information exists. (By the way, call tracking can be your friend.) So, I was only able to base my estimates on the conversion information available in Google Analytics, sans any data for call-in leads.
So, I had the following information to work with:
So, for every 1,000 visitors that I send to this/these website(s), I will get one conversion (0.1 percent) valued at $200 each.
Man, if I only had that call tracking data, I'm sure that these numbers would be substantially different. Is it time to take a guess and "assume" that 90 percent of their leads come via a phone call? Or, should you err on the side of caution and just stick with the lowly 0.1 percent conversion rate? At this point, it's kind of a negotiation between agency and client, but I'm sticking – for now – with working with the 0.1 percent conversion rate.
So, assuming that we charge them $6,000 per month for our services, we'd need to send an additional 30,000 visitors per month to the website in order to meet their goals.
Math: 30,000 visitors (one conversion per thousand, as we see above) = 30 conversions times $200 CPA goal = $6,000.
Now to Be Honest With Yourself
Is it possible? This particular prospect has several Web properties. For one of them, this increase amounted to a percentage gain of 20 percent (the website has already positioned itself fairly well in the SERPs; has a decent history and backlink profile/authority). So, yeah…I feel pretty confident that this is going to play out pretty well. For some of the others, they are starting basically from scratch. And, in order to get these websites to do well, they are going to invest not only in the SEO agency (hopefully us), but also internally on developing unique content and correcting some structural issues that will allow us to build up each of these properties to be seen as unique/resourceful "good to rank" websites. So, the ROI won't be there in the short term. This will require a commitment to the process, the effort, the timing, and the business case for making the investment (as mentioned above).
Case Study Number Two
A start-up company approached me to "do this SEO thing," this week, as well.
We had a nice, honest discussion (I'm known for perhaps being a little "too" honest), and found out that – for this particular client – perhaps SEO was not going to be in the cards…at least in the short term.
I understand. I bootstrapped my company five years ago, and I can very much remember how difficult it was to get ramped up. You've got to be very careful where you invest your money, or you might not be around very long.
This prospect had invested in a company to build its website. Nice looking website, really. However, it was obvious that an SEO was not involved in the development of the Information architecture. There were no pages built to support the keywords that we would need to target. Space in this column prohibits me from getting into too many details, but let's just say it's not optimal. Being a start-up, it has scarce resources to develop a very robust website. The company is in a highly competitive space with a new domain, with virtually no (as in "zero") links to the website. An SEO effort here is going to take a considerable amount of time, effort, money, and patience.
SEO was not in the cards. The commitment just could not be made, and money needed to flow into the company "now."
Solution: Paid Search
Mind you, we will still need to address some of the things that I've mentioned above. We will need to build out those pages, so that we are able to target the keywords that we want to target. But, PPC can make the phone ring (get that call tracking in place) and help drive some revenue. Yes, there will still be some ramp-up time (the paid side is also highly competitive, with some keywords costing $10 per click), but – with proper management – we feel that we can help them do well in this space (average sale is around $700). The unknown here, of course, is that this is a start-up with virtually no history. No idea of conversion rate, and actually very little history to really know what "an average sale" is.
With paid search, we will also gain some very valuable insight into conversion rates for keywords, so that – when the time is right (when the coffers are full), we can make the necessary investment in a concerted SEO effort to help ease the pain of spending $10 CPC. If we were to gain 1,000 visitors from those $10 keywords, that's $10,000 worth of value for the $6,000 investment in the SEO agency (plus other associated in-house costs), with plenty of room for improvement from there.
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Mark Jackson is the president and CEO of Vizion Interactive, Inc., a leading SEO company headquartered in Dallas, TX, with offices in Overland Park, KS and Clearwater Beach, FL. Mark joined the interactive marketing fray in early 2000 in business development with Lycos/Wired Digital and then AOL Time Warner. After having witnessed the bubble burst and its lingering effects on stability on the job front, Mark established an interactive marketing agency and has cultivated it into one of the most respected search engine optimization firms in the United States.
Vizion Interactive was founded on the premise that honesty, integrity, and transparency forge the pillars that strong partnerships should be based upon. Vizion Interactive is a full-service interactive marketing agency, specializing in search engine optimization, search engine marketing/PPC management, social media marketing, SEO friendly Web design/development, analytics installations/analysis, and other leading edge interactive marketing services, including being one of the first 50 beta testers of Google TV.
Mark is a member of the Dallas/Fort Worth Search Engine Marketing Association (DFWSEM), the Dallas/Fort Worth Interactive Marketing Association (DFWIMA) and is a regular speaker at the Search Engine Strategies and Pubcon conferences.
Mark received a B.A. in journalism/advertising from the University of Texas at Arlington in 1993 and spent several years in traditional marketing (radio, television, and print) prior to venturing into all things "Web."
His columns can be found in the Search Engine Watch archive.
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12:00pm ET/9:00am PT