Predicting ROI For Your SEO Time And Budget

How would you spend your SEO time and money when given these choices:

1. Take phrase ABC that ranks #5 organically and try to move it to #3
2. Take phrase DEF that ranks #25 and try to move it to page 1
3. Create new content for new phrase XYZ where you don’t currently rank, and then try to get it ranked on page 1

The answer depends on the following variables:

1. How many monthly searches are there for each phrase (Google Keyword Tool)
2. What is your CTR for each phrase (Google Analytics)
3. How well does each phrase convert to your Goals (Google Analytics)

First, let’s consider how many clicks each position on page 1 should be worth. We will use the results from Slingshot SEO’s study. The top 10 spots have these CTRs according to their study:

1. 18.2%
2. 10.0%
3. 7.2%
4. 4.8%
5. 3.1%
6. 2.8%
7. 1.9%
8. 1.7%
9. 1.5%
10. 1.0%

Now, if you have a term ranked #4, for example, that is not yielding a 4.8% CTR then you may have a meta description issue. Or perhaps in your niche, for that query, your content is less relevant despite the fact that Google is ranking it #4. In any case, we need to create a ‘% of predicted” value for each of your phrases/pages. If your CTR for that page was only 2.4% (half of the predicted 4.8% for rank 4) then your % of Predicted would be 50%. For our purposes we are going to assume that this value is relatively constant as your rank moves up or down. So, if you were to move to spot #1 for that phrase we will not predict 18.2% CTR but instead 50% of that value, or 9.1%. Note that it is also possible for % of Predicted to be greater than 100%. That means you are getting a better CTR than the averages show in the table above. We will consider this when calculating incremental new visitors as your rank improves, too.

Let’s imagine you have a phrase ABC that gets 40,000 searches/month (according to Keyword Tool). Let’s assume you currently rank #5 and receive 600 clicks per month (according to Analytics). Let’s also assume that your Goal conversion rate for that phrase is 1% and that you have a lifetime value of a customer of $200. Now, how much should you spend to increase ABC’s rank from 5 to 3?

Here’s how to do the math. Your 600 clicks per month is 1.5% of the 40,000 searches/month so your CTR is 1.5%. The predicted value for rank #5 is 3.1% so you are 48% of the predicted CTR. We can hold that constant and assume that if you moved to spot #3 you would get 0.48 * 7.2%, or 3.5% CTR.

Now, take 3.5% times the 40,000 impressions and you can expect a total of 1400 clicks per month from your new ranking. That’s an increase of 800/month (since you had 600 from your old #5 spot). Let’s plan for a year at a time and multiply the incremental 800 clicks by 12, giving us 9600 new clicks per year (clicks we wouldn’t see if we were ranked #5 but that we do see if we’re ranked #3).

Our Goal conversion rate is 1%, so 9600 new clicks means 96 new Goals.

And we stated that our LTV of a customer is $200, so 96 * 200 = $19,200 per year in new value created by being in spot #3 instead of spot #5.

So how much should we spend in a year to get phrase ABC ranked #3? Something less than $19,200 to achieve and maintain the #3 spot for a year. If you were to spend $10,000 (and be successful at achieving and maintaining the #3 spot for a year) then you would be $9,200 ahead at the end of the year compared to spending nothing and staying at the #5 rank.

Part of this equation, though, is cash flow, too. You may not be able to spend $10,000 in time or hard dollars at the beginning of the year if its going to take you 12 months to realize the extra income from the increased Goal conversions.

Also, I should note that a really big factor in all of this is your CTR. You can influence that by writing really compelling meta description tags, which are not ranking factors but are usually used as the snippet of text shown below your page’s title in the results page. You should write a benefits-oriented snippet that will attract clicks. It’s worth spending time on this. I’ve seen many people slave over achieving a page 1 rank with SEO but then not realize the fruits of their labor because they have a very weak snippet (meta description) that attracts no (or few) clicks.

Putting it all together in a predictive spreadsheet

Here’s the spreadsheet that I use. You enter the green cells (phrase, monthly searches, current rank, number of clicks in the last 30 days, your desired page 1 rank position, and your Goal conversion rate) and then it calculates the rest. When you’re done you can sort the results by the last column (Increased Annual Value) and have a pretty good idea of where you should spend your SEO time and money, as well as how much time and money each phrase and rank could be worth to you. You will probably find that (1) improving your CTRs is the quickest bang for your buck, and (2) moving a high traffic phrase up a little bit is worth more than getting a long tail phrase to #1 (but, again, depends on the CTR and Goal conversion rates).

Green cells are data entry cells.

Formulas:

• Current CTR = D13/B13
• % of Predicted = E13 / LOOKUP(C13,$E$1:$E$10,$F$1:$F$10)
• Est New Clicks = LOOKUP(G13,$E$1:$E$10,$F$1:$F$10)*IF(F13=0,1,F13)*B13
• Increase In Clicks = H13-D13
• Annual New Clicks = I13*12
• Annual New Customers = K13*J13
• Incremental Annual Value = L13*$M$10

Good luck!