Determining Return On Investment With SEO

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 clickthrough 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 mmarketing 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 spending.

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-a-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 sites.

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.

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