… And Based On That Projected ROI, Get Management Buy-In, Set Priorities and Spend Time Wisely.
Here’s how to project the ROI you can expect on SEO. This way, when your boss asks you to predict next quarter’s SEO numbers to help him with his forecast to analysts, you predictive task will be easy. Better yet, the ROI forecast you make will be defendable.
The detailed explanation on making your forecasts follows after the flow chart.
1) Pick some short-tail or mid-tail keywords. There’s no point picking long tail keywords, because the ROI on them individually is small in absolute terms.
2) Check the keyword for commercial intent.
- Microsoft offers a keyword commercial intent estimator tool. Caveat emptor: The tool’s estimates can vary significantly by day, so just take it as another data point, another road sign along the way.
- Correlate that by asking people to do word associations with the given keyword. You can use Amazon’s Mechanical Turk for that. The associations will show the intent behind a given search.
- Compare the Cost-Per-Click (CPC) estimates Google provides you with for each keyword (set on exact match). The higher the CPC, the likelier there is to be commercial value.
Note: For CPCs under $1, this isn’t very meaningful.
3) Find search volume for your target keywords.
Use Google’s KW tool on exact match to find the exact volumes on target keywords.
It’s crucial to use exact match, and not broad match data, because rankings will result in getting you traffic for your exact match keywords and maybe a few variants. It’s best to be conservative.
3.5) Don’t just accept those search volume projections at face value. Double check.
- Run a PPC campaign.
- If you’re not going to run a PPC campaign (eg if the CPCs are too high), you MUST at least correlate the data to other people’s numbers:
- Use Wikirank, if you see Wikipedia in the top 10.
- Compare with Aaron’s tool.
- Ask friends who’ve been in the same vertical about the search volume. Apparently the accuracy of Google’s numbers varies by vertical, so friends who’ve been there can provide valuable insights. (It’s not too difficult to find such friends once you’ve been in this business for a few years.)
- Also, check against competitors’ keywords. Are you on the right track or really, really clueless?
4) Find out whether you can rank. Scope out the competition:
- Look for backlink numbers and quality,
- Calculate backlinks/referring domains to find out if there are big brands you need to be aware of,
- Look at their anchor text,
- Consider their own domain name – an indicator of anchor text past, present and future, as well as financial backing for marketing.
5) Estimate your costs including domain, hosting, site design + development, links, man hours.
Note: As pointed out by professional search marketer Simon Serrano in the comments below, certain costs are fixed regardless of whether you do SEO or not. So if you’re doing this with an existing site, then you can exclude those costs. But you’ll probably compensate with the man hours etc.
My perspective in suggesting that the domain and hosting costs be included was that of someone starting a new site from scratch, with the mentality, “I’ll rank and sell to search traffic.” For them, the exact match domain might be a big cost that wouldn’t be incurred otherwise, for example.
6) Estimate the traffic attainable from various positions. See Aaron’s big resource page on the topic and scroll down about 1/3 of the way for the breakdown of Click-Through-Rate (CTR) percentage by position.
Hat tip to my friend Henry Shih of online jeweler Ice.com for coming up with the idea to “make a range of projections, from conservative to optimistic” last summer. Todd Friesen has also suggested this.
Update: Given Universal search results with maps, news, videos, images etc., you may want to review these results downwards to be conservative. As Simon points out in the comments, the CTR data has changed significantly since the time AOL leaked its numbers.
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. iii) Finally, multiply by your average commission. Take multiple values for both your own CTR and the merchant’s conversion rate, so you have a range of estimates from conservative to optimistic.
To simplify, if you know what your earnings per click will be (eg recently work in the niche), you can multiply traffic by EPC.
7b) If you’re an adcents publisher: Multiply that by your CTR and EPC if you’re selling CPC ads.
7c) If you’re a retailer / lead buyer: Multiply that by your conversion rate and then by your average if you’re the merchant.
8) Finally, divide your potential revenue by costs. This gives you your SEO ROI – the return on investment for each dollar you put into SEO.
I do this in a spreadsheet for convenience. If you add my rss feed to your reader, you can download a copy of the spreadsheet for your own use.
This has literally saved me thousands of dollars and countless hours by helping me avoid niches that offered a lower ROI for the same time and money investment…
p.s. If you want to know how to prove SEO ROI on past activities, that’s easy. Open your web analytics, and see how many organic visitors on non-brand keywords turned into leads or sales. Alternately, show your rankings increase if you’re not yet in the top 10, and thus not driving traffic just yet.