October 2009 – Feature: Forecasting the ROI of SEO

An eight-step process for determining the viability of launching specific SEO campaigns.

By Gab Goldenberg

As marketing departments grow increasingly accountable, it becomes easier to justify any particular initiative by demonstrating the potential return on investment (ROI). Search engine optimization’s more speculative nature makes it appear riskier when compared to pay per click (PPC), so any meaningful ROI projections for SEO are particularly valuable.

The ability to forecast SEO ROI is also valuable for setting priorities. From a retailer’s perspective, this facilitates comparison between marketing channels so that the channel promising the biggest potential reward can be prioritized. Similarly, from an affiliate’s perspective, this allows comparison between markets and retailers. The decision to rank in the search results for “cocktail dresses” or “beer mugs” comes down to whichever promises the greatest total return and greatest ROI.

It’s clear that there are several benefits of forecasting SEO ROI. So, how do we do it? Here’s the eight-step process I use.

1 Pick keywords you think may have high search volume
Don’t bother with low-volume keywords, because the effort to rank for each individually is so small that it doesn’t justify the work of making ROI projections.

Ideally, you’re picking these high-volume keywords based on data from a PPC campaign indicating what keywords are most profitable. However, many of us don’t have that data, especially if this is the first time an organization is considering SEO. So I’ll assume that there is no PPC data available. If there is, just skip ahead to step five.

2 Check the keyword for commercial intent
It’s useless to project the ROI on a keyword if it’s likely that most of the people searching for it aren’t your prospects. That would be like trying to sell men’s suits to children at the library reading about cotton and wool for a school project. Yes, they’re kind of interested in your materials, but they’re not about to buy men’s suits. You don’t want to bother ranking for non-commercial keywords. There are a few ways to determine commercial intent.

Microsoft offers a keyword commercial intent estimator tool at http://adlab.microsoft.com/Online-Commercial-Intention/. One caveat: The tool’s estimates can vary significantly day by day, so just take it as another data point–another road sign along the way.

Next, correlate Microsoft’s data with the answers you get from asking people to do word associations with the given keyword. You can use Amazon’s Mechanical Turk for that. The associations will reveal the intent behind a given search.

Additionally, you can compare the cost per click (CPC) estimates Google provides you for each keyword (set on exact match). The higher the CPC, the likelier there is to be commercial value. You can get those numbers from Google AdWords at https://adwords.google.com/select /KeywordToolExternal. Just be sure to select “Show CPC Estimates” from the dropdown box. Note: For CPC estimates under $1, this isn’t very meaningful.

If the keywords you picked have commercial intent, continue to step three.

3 Find search volume for your target keywords
Again, use Google’s AdWords tool to find the data. Be sure to select “exact match” from the relevant dropdown box to find the exact volumes on target keywords. It’s crucial to use “exact match” and not “broad match” data, because broad match is a PPC-targeting option that doesn’t carry over well to SEO. It’s best to be conservative and simply focus on the search volume for the exact keywords you’re targeting.

Don’t just accept those search volume projections at face value. Double check. One way to do that is to run a PPC campaign. By running a PPC campaign, you’ll get data on the number of impressions and clicks you can get from any given keyword.

If you’re not going to run a PPC campaign, you must at least correlate the data with other numbers:

• Use Wikirank, if you see Wikipedia in the top 10. That tool tells you how many visits a given Wikipedia page got over the past month. http://www.wikirank.com/.
• Compare the numbers to Aaron Wall’s tool, looking for trends to match (the numbers won’t, but don’t worry about that) http://tools.seobook.com /keyword-tools/seobook/.
• Ask friends who’ve worked in the same vertical about the search volume. The accuracy of Google’s numbers varies by vertical, so friends who’ve been there can provide valuable insights.
• Ascertain the keywords your competitors are trying to rank for or are buying in their PPC campaigns. Are you on the right track or out in left field? (I’ve written a guide on this topic that you can read at: http://seoroi.com/seo-roi-quality/competitive-intelligence-keywords-while-protecting-yours/.)

4 Find out whether you have what it takes to rank, based on competitive analysis
There are a few metrics to keep in mind when analyzing competitors. Backlink numbers and quality indicate your competitors’ raw strength. It’s like learning how much someone can bench press at the gym.

Backlink growth rates tell you how much effort and money competitors are putting into SEO. You can get data on the growth rates over time from Majestic SEO’s historical backlink research tool: http://www.majesticseo.com/comparedomainbacklinkhistory.php.

Competitors’ domain names are an indicator of monetary investment, as well as a factor to help you determine the competitiveness of a keyword. Generic keyword domain names, like food.com, start in the four-figure range and go up from there. Some can cost five or even six figures. Research I’ve published (http://www.searchengine journal.com/backlink-checking-research/12146/ ) shows that it’s easier to rank with such domain names, so it’s a safe bet your competitors paid the price with that partly in mind.

Competitors’ brand recognition is also important. Brands tend to be well trusted by search engines, and therefore have a competitive edge over unbranded competitors. You can get a measure of brand recognition by looking at how many people search for a brand every month.

If you still think you can rank, continue to step five. Otherwise, go back and look for more realistic keywords.

5 Estimate your costs
If you’re starting from scratch, be sure to include your domain, hosting, graphic design, development, links and man hours costs. If you’re working on an existing site, focus only on links and man hours.

6 Estimate the traffic attainable from various positions
Look at the total volume of searches in any given month and multiply that according to the click-through rate (CTR) each position gets. An outstanding resource tool on this topic, with the CTR percentages for each spot, exists at http://training.seobook.com/google-ranking-value#2. You might also want to consider the various factors listed as possible modifiers for the CTR of each listing in the search results: http://training.seobook.com/google-ranking-value#3.

My friend Henry Shih of Ice.com encourages SEO practitioners to “make a range of projections, from conservative to optimistic.” It’s excellent advice.

7 Calculate your potential revenue
If you’re an affiliate: i) Multiply those attainable traffic numbers by your CTR; ii) multiply again by the merchant’s conversion rate; and iii) finally, multiply by your average commission. This will tell you the total revenue attainable from each position.

Don’t just assume one CTR and conversion rate. Calculate a range of what your total revenue might look like by using multiple values for both your own CTR and the merchant’s conversion rate. You should have a range of estimates from conservative to optimistic.

To simplify, if you know what your earnings per click (EPC) will be (i.e., if you’ve recently worked in the niche), you can multiply traffic by EPC.

If you’re a retailer/lead buyer: Multiply that traffic by your conversion rate and then by your average order/lead value. This will give you total revenue possible in each position.

8 Divide your potential revenue by costs
This gives you your SEO ROI–the return on investment for each dollar you put into SEO.

When you argue for investing in SEO versus spending marketing dollars on other channels, present both the total revenue estimates range (i.e., the gross return), as well as your ROI estimates (i.e., the return per dollar invested). Total revenue shows you how big the opportunity is. ROI shows you how profitable the opportunity is, as compared to other marketing channels that may require more or less investment for equivalent returns.

Similarly, as an affiliate or SEO campaign director, you can establish whether SEO for a particular keyword or niche is worth the investment of time and money. You can also prioritize among a group of keywords using this method.

Gab Goldenberg is president of SEO ROI Services. He is a prolific writer and sought-after speaker on SEO. He can be reached at gab@seoroi.com.