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How to justify a search engine optimization budget

Last Update: Friday, October 31, 2003.

In this article I show you how to justify a search engine optimization budget to your VP of Marketing, CFO, President, or CEO.

If you're a marketing manager, I'm sure you use all the weapons at your disposal to achieve your sales and profit targets.

Every banner advertising, direct email advertising, lead generation, magazine advertising campaign requires a proposal to justify the investment.

But what about search engine optimization? How do you justify the investment to your VP of Marketing, CFO, President, or CEO. And how do you quantify the value of search engine traffic?

Well, first take a look at these statistics.

Jul 05 2000: Forrester Research reported that over 80 percent of Internet users reach sites through search engines.

This means if your Web site doesn't attract 80 percent of your visitors from search engines, you're losing out on a lot of search engine traffic.

Feb 14 2001: A study from NPD Group found that search listings are more effective than standard banner or button advertisements when it comes to brand recall, favorable opinion rating and inspiring purchases.

In unaided recall, search listings outperformed banners and buttons by three to one, and more than twice as many people gave a more favorable opinion of companies in the top three search positions than those featured in ads.

The study also found that 55 percent of online purchases were made on sites found through search listings, while a mere 9 percent were on sites found through banner ads.

Again, if your sales from search engine traffic accounts for less than 55 percent of your total sales, you are missing out on a lot of potential customers.

So how do you justify the investment of either outsourcing your search engine optimization campaigns or employing a search engine optimization specialist to do it in-house?

Well, let me speak from my own experience.

I managed the search engine optimization for my old company's Web site, www.iBoost.com. I spent a month optimizing over a thousand web pages.

The result was that in total I obtained over 2,000 top 30 rankings in the major search engines and web directories.

This helped grow the site traffic by 33%, which translated to an extra 400,000 visitors and 8 million page views a month.

Based on those figures, one top 30 position generated on average 200 visitors a month, or 2,400 visitors over the course of a year.

The initial optimization campaign was actually carried out back in October of 2000. But the web pages still command somewhere in the region of 1,800 to 2,000 top 30 positions.

So your rankings never really disappear from the index, once you have established your positions. They may move up or down the index, but they don't usually drop off the top rankings completely, for no apparent reason.

Before the online ad market softened, my old company could command up to $25 per thousand banner impressions. So, the extra 8 million monthly page views could have generated as much as $200,000 in revenue, per month.

Since my company didn't sell any products or services on the web site, I can only imagine how much revenue could have be generated by the extra 400,000 monthly visitors.

How To Calculate What Your Visitors Are Worth

Some search engine optimization firms charge on a pay-for-performance basis. For example, one search engine optimization company used to charge $85 for a top 10 ranking. You may have come across this company.

A top 10 ranking would almost definitely produce more click throughs than a top 30 ranking. If we use the figure of 200 monthly visitors for a top 10 ranking at a cost of $85, the cost of each visitor would be 42 cents.

Not bad. But don't forget that once you achieve a top position, little effort is required to maintain that position. So, in reality, it could generate as many as 2,400 visitors in a year. At $85 for a top ranking, this equates to just 3.5 cents for each visitor coming from a top 10 listing.

Analyze your log files. How many visitors do your top 30 search engine positions bring in each month? Now multiply the average of number of monthly visitors these search terms bring in by 12. This is your average return-on-investment of each top position for a whole year.

So for example, let's say you get 20 top 30 positions, and they bring in an average of 200 visitors a month.

Top 30 Positions 20
  X
Visitors 200
  X
Months 12
  -----
Total Visitors 48,000

Now if you set a budget to acquire 20 extra top 30 positions, you would increase your search engine traffic by 48,000 visitors.

If we take the rate of $85 for each top 10 position that Coastal Site charges, 20 top positions would set you back $1,700.

$1,700 / 48,000 visitors = 3.5 cents per visitor

How much does it cost you to acquire a visitor at present? Probably somewhere in the 25-50 cent range.

Top positions in pay-per-click search engines, such as Overture, cost as much as $5 to $6 a visitor. According to Overture, the average price its advertisers paid for a visitor was 30 cents, during the second quarter of 2002.

Based on our calculations above, the cost of acquiring a search engine visitor is as low as 12% of what it costs to acquire a visitor at Overture.

As you can see, search engine optimization clearly produces an excellent return-on-investment.

Don't forget that search engine positioning is effective, because the traffic is very targeted. Prospects who find your site through search engines are actively looking for information on products and services just like yours.

Search Engine Optimization Is A Science

Just like other forms of marketing and advertising, search engine optimization requires persistence and a lot of testing.

The optimization process is complex and time-consuming. You're trying to align your Web pages with the ranking algorithms of the search engines, while at the same time trying to out-smart your competitor's optimizers.

But the fact remains, search engine optimization is cost effective, and should not be ignored.

Now go convince your VP of Marketing, CFO, President, and CEO of this fact! ;o)

Internet marketing expert.About The Author: Michael Wong is a respected internet marketing expert, and the author of a leading search engine optimization guide, numerous marketing tips, and reviews of marketing tools and ecommerce software.
Publishing Rights: You may republish this article in your web site, newsletter, or ebook, on the condition that you agree to leave the article, author's signature and photograph, and all links completely intact. Full instructions on how to copy and upload my photo to your server.

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