(Read in entirety at Search Engine Land. Published 2009)
In the first installment of this series I asserted that your SEO performance is suffering in proportion to how powerfully you are able to communicate the opportunity to executives. Winning the resources required to grow the channel requires a basic set of metrics. In the subsequent installments, I showed you how to use “Jedi” performance metrics to overcome SEO resistance and size up your market opportunity, then how to prepare for SEO growth by summing up your current baseline. Now at last, I will show how to move closer towards the ROI metric that executives require to allocate resources.
Incremental traffic and revenue
What you consider incremental revenue directly impacts your ROI calculation. Trust me—this is a metric worth fighting over. You need to frame and drive the business conversation around it. This requires a strong understanding of SEO performance metrics like keyword reach, keyword placement, and landing page yield, plus understanding revenue quality metrics and awareness of any search attribution problems.
Executives require your natural search channel make more money this month than last, and on a year-over-year basis. But your landing pages are impacted by many stakeholders and factors—internal and external. So before allowing executives to judge the incremental traffic and sales alone, be sure to communicate changes in the volume of keywords, the volume of traffic and sales driven by non-brand keywords, and your average Google keyword placement.
For example, you may find yourself in the situation where traffic or revenue is flat or down on expectations, after having invested in SEO. The CFO/CMO will conclude natural search warrants no further investment. But there may be more to the story than meets the eye. Maybe a major site-wide change was introduced, like a new categorization system or a faceted navigation scheme. You may find that landing page yield, keyword reach and keyword placement all decreased dramatically against the prior period. So in actuality, it’s a minor miracle that performance was just flat—perhaps offsetting dramatic growth experienced in other areas of the site. These metrics enable you to constructively communicate both progress made, as well as any loss experienced by other stakeholders or factors.
Talk with your analytics package provider about whether your natural search sales are getting the proper attribution they deserve. Since branded keyword navigation through paid search is a key end-user technique for reaching your site, make sure your package is not just giving paid search credit for sales that natural search made possible. If it is, paid search will continue to command more resources than natural search in your organization, and you will continue getting what you’ve always got.
Last, be sure to highlight to your CMO the quality of your natural search revenue against other acquisition channels. For example, contrast your conversion rates across natural, paid and direct-load visitors. Natural search will typically compare favorably against paid search—even in spite of the branded keyword navigation bias of paid search. If your company tracks new to file customers, natural search is likely to be your biggest source—and probably your most profitable. Ideally, also compare the lifetime value of searchers against other channels as well.
Calculating natural search return on investment (ROI)
Once you’ve determined your true incremental revenue, its time to calculate return on investment. What has your cost of revenue been over the same period of time? You need to add up a few line items here:
- External costs, including SEO training, consulting, and implementation services
- Internal cost estimates of IT, marketing, copywriting, project management time
If incremental revenue is $500,000 and incremental spend was $250,000, a simple ROI is 2:1. Of course you may need to fine-tune the cost metric to account for SEO work deployed over a prior time period that’s paying dividends in the current period or vice versa. For example, you may “amortize” the cost of developing new institutional processes, such merchandisers or copywriters that now consult keyword research tools before naming products or writing copy. Conversely, you may need to account for time-to-market as a missed-opportunity cost if it takes six months let’s say, to execute tactics that you “purchased” in a prior period.
The business case we calculated through this series goes like this: Our addressable market spans 200,000 unique keyword markets and totals roughly 5,000,000 searches per month. We’re capturing 1% currently. The cost of acquiring that traffic through PPC totals $1,000,000 per month. Of our 200,000 addressable keyword markets, we are reaching 1,000. We rank on Page 1 of Google in 70% of those markets. We attract 2.5 searchers per keyword. 95% of our search traffic comes from queries for our company name. And 97.5% of our pages attract no search visitors.
Trying to communicate your performance and market opportunity in this disciplined manner has probably felt torturous. But the benefits to you as a marketer and organization are enormous. You can now let the data be your guide towards growth. The scenario we have been calculating screams opportunity to executives. Let’s role play this from an executive perspective: You’re telling me that nearly all my search traffic is coming from my brand name? I’m visible in fewer than 1% of my non-brand markets? I’m getting only two searchers per keyword? Only 2% of my pages are attracting searchers? What does it take to double any of those metrics? I can connect any of those dots to revenue. I want to hire internal/external SEO who understands how to make that happen and I will incent them to do so. What does it cost me? As long as the ROI is better than my alternatives, I’m in.
This is a metrics-driven business conversation. This process will help you win the time and monetary resources to dramatically increase search performance. Having the technology and skills to execute, of course, is another story.