Lots of businesses successfully leverage SEO (Search Engine Optimization). Compared to other marketing activities SEO is cost-effective and measurable. Attach Google Analytics or other analytics tool to the web site and you get a good understanding of how the marketing budget is spent. Visits, time on page, forms filled and products purchased, you can track it all and more. The value of an SEO campaign may already be determined based on these data. That’s what marketing managers or business owners should do. Additionally, and most importantly, you should compare to the competition to make sure that campaign is doing well. Luckily there is a way to do so by comparing ROI on SEO budgets with alternative ROI you can get on the same budgets potentially spent on PPC.
Some explanation for non-seo folks: PPC (Pay Per Click) allows you to immediately run ads displayed on selected keyword searches but lasts only while you pay. SEO is more of a long-term investment. You hire an SEO agency and invest for some time by paying their retainer fees unless the web site shows up high enough in search engines to cover SEO bills and ultimately bring solid ROI. There is always an option to invest $5,000/month in PPC and get 1,000 visitors to the site (figures vary depending on the cost per click) or hire a SEO agency for $2,000 and get same 1,000 visits half a year after they start working, or 10,000 visits or 100. That’s all about numbers (read economics).
The economics of SEO is very simple yet fundamental. Here is an example:
Say a client engaged an SEO agency to promote his/her web site. After 6 months of work on the site the SEO agency got to the point when it’s delivering 5,000 visits to the web site per month. The monthly bill from the agency is $2,000. Now check the cost of traffic for those particular industry keywords in Google AdWords. Say it is $5 per click. That means if you were to purchase those 5,000 visits you would be paying $25,000 per month. Granted $2,000 monthly bill from the agency is a very cost-effective marketing.
Change numbers a little bit and you will understand why so many SEO agencies don’t deliver or the contracts get terminated. Say the agency delivers 2,000 visits to the site monthly but the industry is not that competitive. Cost per click in Google AdWords is $0.5 for that particular industry. It means that client could purchase the same number of visits for $1,000, risk-free, no investment. But the $2,000 monthly bill becomes unreasonable.
As you see, this is a very simple yet effective method. Two cooperating parties may quickly determine if their cooperation is beneficial. In order to determine the efficiency of an individual SEO campaign, SEO agencies or their customers have to multiply the number of visits delivered from search engines to the site by the average cost-per-click, which is common for a particular industry. If the ROI on SEO is at least 2 fold more than that of a PPC campaign then everyone may be sure that this contract is mutually beneficial and will last long. Otherwise there is no point in SEO because the client could purchase traffic from Google avoiding making and investment and taking a risk.
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