I typically run a couple of a hundred queries a week around SEO long tails to try and capture SEO posts that may not be on my radar, but worth a read. The nature of these change from time to time based on my current interests – after all, I started out as a Small Business SEO and now work at advising Big Brands on SEO. As may be apparent, due to changing interests, many of these queries are around Big Business (or Enterprise) level key phrases. One of these being around budgeting and estimating Return on SEO Investment (aka SEO ROI).
Surprisingly, there aren’t many resources available to businesses to realistically budget their SEO spend, for many reasons, one of the bigger ones in my opinion the difficulty in calculating life time value of a position. After all, it’s not like SEO rankings are like PPC, where every click has a direct attributable and potentially a onetime cost (of coursed based solely on a last click metric. Under other models such as a weighted average model the PPC click has a higher lifetime value than the last click model). So imagine my surprise that that one of these keywords “SEO Budgeting” led me to an eHow article. Now for those of you who may not be familiar with the content farm nature of eHow, you may want to visit my post on content farms.
The article (which I refuse to link to) was written by a company that ,surprise surprise, offers Search Marketing services. Now I don’t want to blast that company – what they do is none of my business. But the information they supply to the general public is. So with the hope that SEOmoz ranks higher for this keyphrase, I would like to dissect their advice and point out some better resources for the SEO planner.
Difficulty:
The level of difficulty indicated is Easy. I wouldn’t say it’s easy to decide how much money needs to be spent on SEO. There are so many assumptions that need to be made – take for example some of the top line questions you should be asking:
- What is your sites SEO Swot Analysis?
- What are you trying to rank for?
- What is your average return on your current SEO?
- What level of budget do you have available?
I would give difficulty level between Moderate and Difficult, depending on the size of the business to the breadth of keywords that the site is trying to rank for.
Ways to Gauge Budget:
Once again, in my view this advice fails. The three things that have been advised are:
- base your campaign on a past successful campaign. If you had a past successful campaign, you probably not going to be looking for SEO budgeting advice, considering that you have already run successful SEO.
- “designate a target percentage of total sales you wish to achieve though SEO marketing and work backwards to make this figure a reality.” This is a feasible way to predict future budgeting ONLY if you have run a campaign previously. Ideally you should base your budgets on the opportunity available with reference to your available spend and ROI.
What portion of your budget should SEO be made up off:
Sorry, but that is utter rubbish. Where did those figures come from? Very poor advice. SEO, like any other marketing strategy should be run by either branding decisions where you work with maximum exposure possible) or on measurable ROI.
To explain that a bit further – take for example you have an opportunity to rank for a pot of 4 keywords:
If you had to choose, you would probably go for Green and Yellow widgets, if traffic was your goal right? Now look at the details below:
A Bit more depth – you have evaluated the cost of acquiring links, writing content etc for those specific keywords, and worked out the cost of ranking that keyword. Now if you had the full £9,500, you would probably go for all those keywords. However, budgets are finite, so you may not have the full £9,500 to spend. So what else do you need? You need to work out the revenue on those keywords:
Remember, every keyword has its own revenue potential. Just because a keyword has high volume, doesn’t mean that its value in proportion will be the same as a low volume keyword, in fact, the returns on volume are normally diminishing. Which is why you may want to add one more metric, ROI:
Isn’t that an interesting metric? The keyword with the highest volume has the lowest return, while the third lowest keyword has the highest return. Taking your keyword evaluations this far help you nail down the most profitable keywords that you should be aiming for, which in return gives you a view of getting the right budgets put together.
OK so the big questions are HOW do I work out those figures above?
To start with, you need to work out potential traffic, by estimating it. Kate has done a brilliant job of showing you how to predict your traffic. I dont think I need to reguritate those examples here :).
The second step is to work out conversion / return – now there isn’t an easy way to do this, but you have three routes – either grab your current conversion by “generic” keywords, and use an estimation (this will probably NOT give you’re the variant ROI’s as in my example above) or segment those generic keywords into behavior patterns. By this I mean you could breakdown your current generic keywords into the type of keyword, and then break that down a step further into the length of the query – rule of thumb experience says that the longer the tail, the closer the user is to the purchase journey. This means you could apply a higher average conversion rate to longer tail – but using your data segmented into keyword type and then into tail, will allow you to get a rough estimate how that mechanic works currently for our site. You can use those figures to estimate the sales.
However the two examples above require you to have some history. What would you do if you didn’t have any history? I would use an isolated PPC test to judge the conversion value of any pot of keywords. The isolated tests will probably provide you with usable variants of values that you can use for conversion. Rand covered this idea way back as part of his Head Smacking tips - Using PPC as an indicator of Success.
How do you work out the cost of ranking for any single keyword? This is probably one of the more difficult questions to answer. However, some of the key indicators of cost of any given keyword can be derived from working backwards from your Competitor audits. I think the biggest variable outlay for any SEO ranking is the cost of acquiring anchor based text links for the given keyword. The second variable is content rewrite or content enhancement, which probably is lower than the link cost. To these variable costs, I would proportion other SEO “fixed” costs such as any related fees, overall other developments impacting SEO, time of staff spent on SEO improvements etc. If anyone has any real good ideas to estimate the cost of ranking, please share!
Summary
Unfortunately, if you kept up with my ramblings so far, you will notice that there isn’t a fixed art of estimating the budget, but there are some arbitrary estimates that you can use to work out the portioning of spend to SEO. The key thing in my opinion, is to invest in ROI while staying within your allocated budgets.
Disclaimer
This is my methodology or route to working our SEO Budgets, please make sure that whatever decision you make is best catered for your individual example. Also, the examples given are very simple views of setting keyword base targets - carrying out this exercise for 1000's of keywords isnt exactly easy, but it is worth the time and effort.
Resources:
- Jamie wrote a very useful post on convincing your boss to spend money on CRO. He includes a link to a very useful spreadsheet, which you can easily adapt to work out SEO ROI instead of CRO ROI.
- This is a very useful PPC ROI calculator, which yet again be adapted to work out your SEO ROI figures…
- Gab specializes in SEO ROI, and he gives us 8 steps to forecast ROI from SEO.
- The SEO Slingshot blog has a two part article on evaluating the Value of SEO
- Last but not least, Aaron’s SEOBook blog looks at the Value of Google Rankings in some serious Macroeconomic detail.
hi my dear,How are you today?my name is jane and i am a beautiful lovine and caring young girl with full of love and caring,well i saw your profile today at(www.seomoz.org) and i love it,i think we can click together and make some thing good out of it so please try to contact me with my email address([email protected])i will like to show you my photo and at the same time you will know more about me.once again please contact me true my email address.([email protected]) dont send it to the site,thanks for your understanding.jane
Its that profile pic at work again Rishi...
LOL! Looks like you'd better go back to the Jack Daniels avitar Rishi.
I was going to delete this as spam, but then you people gave it 4 thumbs up. I guess the community has spoken. As I suspected, you're all crazy ;)
LOl I guess we are. Its been a while since we went all a bit nuts on the SEOmoz posts like we used to back in the day...
Hey Rishi. How great to get back online and find another post from you! Long time no read.
The biggest problem (for me) is figuring a conversion number for clients that have no usable history due to having a really, really crappy website. It's the chicken and the egg syndrome. If you run PPC with a really, really crappy site, your conversion will be quite different than if you run PPC with a really slick site. So the only way to get an accurate picture is after the site has been changed.
Kudos for pointing me to all the existing articles on the topic. I'll dig into them this weekend.
PS - Really great to read another YOUmoz from you.
This post very aptly explains the logic behind keyword centric costing for SEO.
...every keyword has its own revenue potential. Just because a keyword has high volume, doesn’t mean that its value in proportion will be the same as a low volume keyword, in fact, the returns on volume are normally diminishing. Which is why you may want to add one more metric, ROI - .... Taking your keyword evaluations this far help you nail down the most profitable keywords that you should be aiming for, which in return gives you a view of getting the right budgets put together...
Very true especially now keeping in mind the current scenario when the search patterns are becoming more and more specific and the user is more savvy about how to search for what he is finding on the search engines.
This metric is not only logical but surely adds value to the SEO efforts and services and is going to help the SEOs to put forward the SEO costs and budgets more confidently, logically and a lot of clarity and conviction.
A very apt title indeed this way it is actually 'Crafting The Budget' rather than ascertaining it or deciding upon it.
Thanks for a detailed explanation.
Nice post Rishi,
A sidenote really is the ROI - in B2B this is often the basis everything is done on - and yet working out your ROI online is actually quite tricky, unless you've got a decent setup in place (website hooked up to analytics that are integrated correctly into your CRM system) and that the setup has been running for at least a year... you may be scoobied when it comes to working out your online ROI...
Not that I've faced that frustration! Honest...
So yes whilst the above model is great for B2C where you can get conversions pretty quickly, afterall people may buy a t-shirt at one visit one search level. B2B isnt quite so straightforward... any advice?!
Good stuff tho :)
Pretty awful working out SEO ROI for b2b - given the latent conversion - up to 6 months in my experience - I wish I could advise, but thats a can of worms I dont think I can open... (nor am I qualified to :p )
Damn you... :P
It is possible, but you need the right setup in place for a long time, and that costs money, resource and time... so crafting an SEO budget is more tricky and better based on branding rather than actual conversion in some cases. Tricky considering how much of B2B marketing is obsessed with ROI!
Yep, working out ROI in B2B is a real pain.
The main problem is the length of time till conversion.I've created a webform that customers can submit, which goes directly into the CRM system (along with analytics data).
This helps us see (even over long time frames) what keyword got the conversion, the search engine the customer used, the pages they went to first etc.
It will be a while before you build up enough data to glean any useful stats from this but it's a good way to record and store everything about an enquiry.
I'm also using this with a CRM so salespeople can see the keywords/analytics that got the enquiry, they can then tell ME which keywords are most important!
Paul
Ciao Rishi,
it is a pleasure to read a post of your here again. I spent very profitable hours reading your past ones and this is as good as them.
I think - and correct me if I'm wrong - that your suggestion about how to budget an SEO campaign is especially good from an in house perspective, but can present quite practical problem from an agent/agency point of view.
Let me explain me better.
When you're in house you usually contribute in creating a budget, in this case the search marketing voice of the marketing budget. And you can do it with plenty of information: analytical data, raw data from the commercial (because maybe some online conversion ended in an offline enviroment, for instance a final sell via phone, as it can be common in the tourist market) and so on.
But when you are an agent/agency you cannot contribute to that side or, at least, you cannot do it until you have a consolidate history with your client.
I know that probably you are going to tell that things are not so different (you receive a quote, you do a previous cost previsions audit and then you apply your margin), and probably that it's true. But it cannot be so accurate as in the in house situation just because you don't have datas to refer to but your first audit, to not talk of the cases when your client already comes with a definite budget (i.e.: I've these $$$ and cannot add more bucks).
As you surely know, this is especially true when it comes to small businesses. Therefore, finally here is my question, how did you deal the budgeting when you were mostly dealing with small business clients?
"how did you deal the budgeting when you were mostly dealing with small business clients?"
Actually when I dealt with small biz clients, I would normally work out what they had as a budget and then work out what services I could provide. And I would make that clear. You are right, it isnt easy, but normally for small biz clients, I would charge a consultation fee, which would include analysis, report and target keywords. Then estimations for what it would cost for those keywords.
The clients would then treat that as almost a pick and mix and decide what they wanted - I would make sure they understand ROI, but also make it clear, unless they know what their conversion was, I couldnt advise on what KWs to go for. On a safe bet, most went for a combination of high traffic KWs and a mixture of long tail volumes...
hey Rishi, this post is spot on... I like the insights into working working estimated ROI for each keyword... and yes, as soon as I read through your last table, I thought oh! it'd be wonderful to find a easy way to work out the estimated costs of ranking for a specific keyword as it is indeed the most challenging part, at least for me... but all in all, this post made my day today... + all the citations to other posts and the useful resources you've put together deserves a big thumbs up, thanks!
Nice work Rishi... very detailed walk through. Setting a budget is always a detailed task but can be even more so in an industry such as ours where the actual ROI is so dependent on the product offering of the individual organisation in question and their larger business aims - or lack thereof.
Thanks again for sharing this - very useful guide.
This is a good starting guide for establishing a budget. I know many small/medium business owners who don't think their costs through like this, but instead they kind of "wing it" with simple numbers - SEO services cost me $x/mo and revenue from search traffic is $x/mo so as long as revenue is greater than cost I'm in the clear. That sort of reasoning is ok, but the approach you describe gives a much better understanding of how a budget really should be formed.
As for the cost of ranking for a particular keyword, that depends on a lot of things. Some rankings are attained purely for brand building and reputation management, without direct ROI associated with those efforts. Other rankings are built purely for profit, so it's easier to measure cost vs benefit.
Actually all your calculations are wrong, in case that your are talking about ROI as Return of Investment, ROI formula:
ROI = [(Payback - Investment)/Investment)]*100%
You can find more info here, here or here
Actually I was working out the ratio - as ROI - revenue:spend simply because I dont count this as investment, but expenditure - thus giving you £x spent gives you £y in sales - but in effect you are right - I should have clarified that I wasnt using the traditional formula to work out ROI.
It is an interesting point do. Investment vs Expenditure.
Good analysis, I think the "trick" here is in establishing the cost of achieving keyword position. I think experience plays well here. But also if we assume the figures in your example are spread over one year, then in year two (assuming you hold on to the keyword position) your input costs are greatly reduced, thus your ROI increases. Surely when an SEO'er is defining ROI for a client it should be spread out over 3-5 years, NO?
Realistically the answer is absolutely. However, many businesses offset their spend against the coming years expectations, which mens unless you have a client that is willing to set a 2-3 year plan in motion, you are stuck with budgetting annual spend.
A good SWOT analysis could take up to several days or weeks. Our experience with small biz owners is they tipically do not have the patience, and or the budget to support that kind of research.
Now no more confusion in preparing a quote with seo budget. Only worries are on results (if it is risk reward basis like my old boss)
Hello Rishil,
Your post is good and can surely help from a "presale" perspective. However, IMO, trying to establish the cost of a #1 position is trully not a good way to go because :
1 - youll be making assumptions based on very relative parameters
2 - you have a very high risk of not meeting with the client's expectations
I would'nt sell the service of bringing a keyword on the #1 spot for a certain amount but rather selling the service of raising the positions for that keyword. This way your client understands that SEO does not come with a "garantee" (very important)
I am not selling a service - this is for budgetting from your own businesses point of view :) No guarantees - most of this would be based on your own capabilities.
Ha ha ha. maybe this avatar IS a bit too provocating :P
And you that used the Girl licking Old Jack to stand out... look how a spam can be ironic ;)
lol yeah :)
Nice info there Rishi, we are currently undertaking a similar process to understand the cost of ranking certain keywords, I recently raed the ehow article you mentioned and totally agree, it is pretty poor. The good news is that your blog post now outranks them :)
Awsome post, really gave me some useful insights.
i do have one question btw, if crafting a SEO budget gets that complicated, how can you do all that work (as a SEO agency) for the "price offer" when there's no guarantee that the client will actually use your services ?
brilliant advice on the "conversion calculation by ppc" btw, thanks alot!
For the ROI contributions, I would focus on the total dollars returned rather than the percentage or multiple of return (ex: Better to get a 2X return on $1,000 than a 100X return on $1).
I think your recommendation to use AdWords for data is extremely valuable. In my opinion, AdWords is the greatest and least expensive market research tool on the planet.
Thank you for the post.
you're wrong sorry!
ROI = Return on Investment, NOT gross profit
ROI is by far the better metric to track, work to a positive ROI then maximise your spend
- DO NOT focus purely on gross profit, as you will miss opportunities that may seem insignificant initially, but can scale massively.
@dvansant, I think I understand what you are trying to say. While MOGMartin is technically correct regarding ROI, the way I understood you was that even if you had a low dollar item with an insanely high ROI, it would take a ton of sales to match the profit on a high dollar item with a modest ROI.
I believe that here we are confusing Break Even with ROI.
Not technically the same, even though related.
In summary, I think the confusion is the difference between the technical meaning of ROI in theory and the real world application of ranking error prone opportunity estimates by estimated ROI alone. This is particularly important if the range of estimates spans from small numbers to large numbers.
Yikes, I wasn't trying to define ROI and should have parsed my words more carefully. I understand the concepts. My first career out of college many years ago was finance, but building financial models all day is really, really boring!
ROI is an extremely valuable metric, particularly when prioirtizing opportunities. And, in a perfect world, choosing the projects with the highest ROI would maximize profit. In reality, it's just not that clean. Managing many smaller campaigns eats up a lot of time and effort that is rarely accurately captured in these types of estimates.
Also, there tends to be a bias towards smaller numbers when looking at ROI alone. It's not hard to turn $10 dollars into $100 or $100 into $1,000. Turning $1 million into $10 million is significantly more difficult but I'd settle for turning $1 million into $5 million rather than chasing $100 projects all day.
Finally, ROI estimates are much more vulnerable to estimation errors when dealing with smaller numbers. Keep in mind that the excersise outlined in the original article is based on estimates, not certainties, and SEO cost and benefits are not easy to estimate. After adjusting for some margin of error, I may be less excited by a 21X opportunity if a mere $1,200 error in the cost estimate will slash the opportunity ROI in half to 10X.
ROI is very, very important. My point is that one should never lose sight of the ultimate goal of maximizing profit. Profit maximization is simply not as simple as looking at he ROI estimates column of a spreadsheet.
@MOGmartin: I suspect that if we actually sat down and discussed our approaches, they wouldn't be very different.
Great post, thanks for the info, and I totally agree about the content farms.
In place of historical Adwords data would you recommend utilizing Microsoft's Online Commercial Intention (OCI) data as a factor when analyzing keyword ROI potential?
To be honest I havent used it so cant advise. But my gut says that if you want to predict ROI from Google traffic, you need to use google traffic as a benchmark, and PPC is the closest you can get to it without SEO rankings.
I recently came across your site and have been reading along.I thought I would leave my first comment. I don’t know what to say except that I have enjoyed reading.Nice site,I will keep visiting this site very often.<a href="https://www.handsome-seo.com">SEO services</a>.
Yes guys, here u describe nice ways but I think charges is dependent on website also & products/services.