Saturday, September 20, 2008

ROI in search engine optimization

ROI in search engine optimization

We have looked at various strategies and options related to search engine optimization.

The key determinant that you have to use to formulate your own strategies would be to

ascertain the ROI from your plan. There seem to be a surfeit of techniques, suggestions

and tips for SEO. How do you separate the wheat from the chaff? Moreover, the

importance of each option is closely linked to your own objective, and consequently your

budget in terms of management time and expenditure. How do you measure ROI?

Americans conduct an estimated 790 million searches per week, according to research

from ComScore Media Metrix. The Yankee Group reports that only 20 percent of U.S.

companies tracking their search referrals are measuring performance beyond the initial

click-through to the web site. This is very low. The key to a successful search engine

marketing strategy is constant testing, revising and optimizing based on metrics. In order

to maximize your return on investment, you must measure the performance beyond click-

through—by measuring the complete interaction of your visitors with your site from

acquisition to conversion to retention.

Search engine marketing is similar to advertising and other marketing campaigns. The

marketing people would be interested in knowing the results of any campaign and most

often the result is desired in terms of increase in company revenues. Name recognition,

brand image creation and other outcomes are important; however the bottom line is sales.

ROI should be able to determine your website’s conversion rate in terms of the ability to

persuade your visitors to take the action that you desire them to take. At the same time,

the success in terms of increase in sales depends on several other factors such as the

competitiveness and value in your product or service offerings and the quality of your

website to induce the visitor to take action. The search engine marketing effort is to bring

the right targeted visitor, and bring the visitor to the right section at the right time.

Converting such a targeted visitor to a customer is not within the ambit of SEO.

How does search engine optimization compare with other options for online advertising

and promotion? Jupiter Research predicts that by 2006 the spending on E mail marketing

shall be $ 9.4 billion, whereas the spending on online advertisements shall be $ 15.6

billion, and that on digital marketing initiatives such as campaigns, promotions,

sweepstakes, coupons etc. shall be around $ 19.3 billion. Forrester predicts that total

online advertising spend should be $ 42 billion by 2005 a significant 9.5% of total ad


Costs in search engine marketing include the cost of optimization services as well as the

paid inclusion and pay per click programs. Typically the cost of optimization for a small

to mid-sized site through a firm may run from a few thousand dollars to over $ 50000 for

a large site. If you do it in-house consider around four person months’ work plus around

two person months of maintenance time over the ensuing six months.

How do you compare costs per click or costs per thousand impressions for search engine

optimization vis-à-vis other forms of advertising? PwC report that the effective cost per

thousand impressions or views (CPM) for an online ad is around $ 3.50 for a general site

(though it could be higher at $ 10 to $ 100 for other specialized sites) compared to $ 19

for newspaper ads and $ 16 for Prime-time TV. The CPM for search engines is certainly

higher, but then it leads to targeted impressions. Thus it is important to look at targeting

and conversion rates, not just CPM. Clickthrough rates for ad banners, in general, can be

as low as 0.4 to 0.5%. Conversion rates would show you what percentage of visitors

actually resulted in business. As discussed below, this may be easier done in e-commerce


Cost per click for important keywords at Overture could be as high as $ 0.50 to $ 5 or $

10. The average bid reported according to one source is $0.73 per click (for Overture).

Thus this is already lower than the cost per visitor for online ad banners. Overture can

only cater to a small percentage of search traffic, while Google, Yahoo and others

comprise the larger portion; thus it can be said with certainty that SEO is the most cost

effective ROI generator.