Quantifying the value of Search Engine Optimization (SEO) efforts has always proved to be a challenge. Furthermore, providing a client with a forecast on their potential Return-On-Investment (ROI) if they proceed with an SEO campaign is next to impossible. At the rate Google changes their algorithm, no internet marketing agency can guarantee a client a sustainable #2 ranking in Google for any somewhat competitive keyword.
But every day people still make a leap of faith to try Search Engine Optimization for their business, being promised higher ROI than Pay-Per-Click (PPC) or other forms of online advertising would provide. Many of these people quit after three months, as they don't have the staying power to see the campaign through, but those that persevere usually agree that SEO provides the highest ROI of all traditional forms of internet marketing.
Hey! If it was easy, everyone would be doing it!
Barriers to using SEO
- Ranking and timeframe CAN'T be guaranteed
- Wild ranking and traffic swings
- Up to 6 months with (sometimes) little improvement
- Constant changes to website content that often require approval – thus delays
- Expensive and labor intensive
- A campaign with no tangible guarantees is usually impossible to have approved by a committee
- Horror stories about SEO, such as JC Penny’s disaster
As a result, most companies do not even start a campaign and those that do usually require a long time period in order to see results. In that time, managers/directors can change, budgets can run out and accidents can happen.
So is SEO worth it?
If you have a long term focus, are willing to give up some control of your website and have the budget to see it through – yes, SEO is worth it. I've personally been doing SEO in the medical industry since 2003, giving me a unique insight into the long term benefits of SEO.
How is SEO ROI calculated?
The ROI of a SEO campaign is easiest to calculate by comparing the number of “clicks” it produces compared to a Google PPC campaign. While there are certainly many other benefits to a high Google ranking on keywords that define your business, such as branding, recognition as a leader in your industry (yes, people do think that if you're #1 in Google, that you must be the best) and “Residual Value.” For the sake of argument, lets just work with the hard numbers. Because Google PPC and other PPC networks, such as Bing and Facebook operate on an auction system, where one can bid for the highest position – its assumed that the price paid per click represents the true value of a new visitor visiting a company's site.
If XYZ company sells iPhones for $500 each, at a profit margin of $100, and pays $2 per click – this would mean that they would have to convert 2% (1 in 50 visitors) to sales for their Google PPC campaign to be a profitable venture.
In the same way…
If XYZ family practice earns a gross revenue of $500 per new patient per year, at a profit margin of $100, and pays $2 per click… you get the point.
One could argue that just as the patient might become a patient in that practice for 20 yrs, and bring their whole family in, and so on, the same could happen with the iPhone buyer. Because Google PPC is available to everyone, and is the best alternative to SEO, SEO ROI is most accurately compared to a Google PPC campaign.
Case Study – B2B Medical Vendor
The above chart represents the traffic generated from Google (Organic) search over a 53 month period. In this case a client actively contracted a SEO firm for a period of 17 months, at a total cost of $3000 per month = $51,000. The website was then purchased by another company, and all SEO was halted and not reinstated with any other firm. This client operates in an industry that averages $3.50 per click. In this 53 month period, Google (Organic) generated 266,000 visitors. Let's examine the ROI generated in the initial 17 months, then the residual ROI generated in the following 36 months.
47,000 visitors in first 17 months @ $3.50 per visitor = $164,500
219,000 visitors in following 36 months @ $3.50 per visitor = $766,500
If the rankings maintain their current rate, which the trend shows that they will, the site will generate another $766,500 worth in clicks over the following 3 years.
$1,697,500 in clicks over 7.5 years. Total ROI = 33 times initial investment.
* Due to the increase in SEO competition and recent changes to Google's algorithm, producing the same result in today's market costs approximately 2.5 times more than it did in 2007. At the same time the average CPC has increased significantly, by a rate of approximately 50%. Considering these adjustments, a good SEO campaign should still deliver an ROI of somewhere between 15 and 20 times its initial investment.
Written by John Deutsch, President and CEO of Medical Web Experts
Medical Web Experts has helped physicians, hospitals and medical vendors with Search Engine Optimization assistance since 2003. For more information about their Internet Marketing services click here.