How to predict SEO ROI (return on investment)

By November 14, 2010 Google, PPC, Search Engines, SEO, Thoughts 9 Comments

Quite often I’m talking to people and they tell me they don’t want to do pay-per-click (PPC) as they don’t like paying for traffic, it’s at this point that I tell them that there is no such thing as free organic traffic.

Sometimes you are lucky and you write a blog post or a page and it ranks really highly and you get loads of traffic from it, this is the exception, normally you have to spend ages tweaking your onpage content and building links, it can take months to get onto the first page of Google and often about the same amount of time to get from the bottom of page 1 to the top 3 (which is where the money and traffic is).

SEO if not free

Let’s look at the exception for a second, if I write a blog post and it ranks highly, there is still a cost – namely the time it’s taken me to write it. OK so if I’m blogging for myself it’s not really a cost, but if I’m blogging for another company then there definitely is a cost associated, if you are lucky enough to employ a copywriter or such in a marketing department then you pay for their time.

What are the factors in SEO ROI?

If I have a page of great content that doesn’t rank well because it’s a really competitive industry then we have to look at the things that can be done to get it ranking. These are the things that need to be considered when predicting the effectiveness of an SEO campaign:

  • Search traffic for the term you’re targeting
  • Click through rate of the different organic rankings
  • Conversion rate of the page / site / estimated conversion rate
  • How much will the work cost
  • How long it will take
  • What’s the profit in the product / service the company sells
  • How much will it cost to maintain the position
  • How long will it take to recoup the initial investment

How to project your ROI from SEO

Let’s for a moment focus on a sector I’ve previously carried out search marketing in: the debt management sector. The debt management industry is huge and it’s really highly converting keywords are the short keyword phrases such as Bankruptcy, Debt Management, IVA etc. Now I know that to get to the top of Google you are going to be looking at spending the best part of £200,000 – probably more – and it will probably take a couple of years to get up there.

So if you’re going to outlay £100 k then you need to know you can get the return on investment and how long it will take. So you need to know how much traffic there is out there. For arguments sake let’s say there is 100,000 searches per month on average.

You need to have an understanding about the amount of traffic your going to get from the different positions on page 1 of Google. My best guess is that position 1 – 3 gets around 3/4 of the average monthly search traffic wheraeas position 4 – 10 get around 25%. Position 1 probably gets around 90% for the average search traffic for that keyphrase. So let’s be conservative and say we’re going to get to position 1 and get around 50% of the traffic that’s out there – that’s 50,000 visits a month.

Then we need to know how the website converts – if we’re talking about a new website we won’t have the figures, however my best guess from experience would be about 3% – so that’s 3% of 50,000 – that’s 1,500 conversions a month. That’s 1,500 leads, of which we need to know the debt management company’s success rate in converting into sales – let’s say 25% – so that’s 375 debt manaegment customers a month.

We then need to look at what the average profit in each conversion – let’s say it’s £100 (it’s probably more but I want to prove a point)  so that’s £37,500 a month with this in mind it will take around 5 or 6 months to months to make the initial investment back.

So from this point it’s plain sailing, well not quite, if you’re prepared to spend your money and time to get your business’ website to the top of Google you can guarantee that your competitors are going to as well, so you’re going to need to keep spending some of your budget to keep you up at the top of Google, any drop from position 1 can have a serious impact of your business’ profitability. I generally say about 50% of your original monthly link building spend should still be in place, that’s going to be around £5,000 a month that needs to be factored in to maintain that top position, so the website’s only really making £32,000 a month, so it’s actually going to take 7 months to return your investment.

One final thought. It’s very likely in the time it’s taken you to get to that position, Google will have closed some of the loop holes you’ve been using to get up there. This will add time to the process, increase your projected monthly spend to maintain your position and reduce the click through rates and conversion rates as you bounce around the first page. However, I’ve not come up with a measure of this element yet!

Such is the life of a search marketer.

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