RE: Search Engine ROI

From: Steve Harrison <merlin_at_paypermaster.com>
Date: Thu 24 May 2001 11:15:25 -0500

SIMON ROLFS <ideas_at_creativegenius.ca> WROTE:

>ROI or in this case search engine ROI should be based
>upon the increase or decrease in your traffic divided
>by the cost of your search engine optimization efforts.
>As an example if you spent $10,000 to have your web
>site optimized and as a result this effort (over time)
>are rewarded with 20,000 added visitors, the cost of
>your efforts are .50$ per visitor.

Probably a matter of semantics here, but wouldn't Cost
divided by Traffic be a better formula for CPV (cost
per visitor), or, in the case of pay-per click engines,
CPC (cost per click) rather than defining the ROI?
CPV/CPC calculation would seem essential to determine
an ultimate ROI, but as an ingredient in the calc,
not an end result.

Simon's follow-on comments hit the nail directly on the
head when he identifies perhaps the most critical aspect
of the whole stew of calculations -- the web site's CR
(Conversion Rate). Simon adds: "I would argue that as
a significant increase in traffic resulted the campaign
was a success, however since this effort failed to sell
my product/service or cause, was the failure due to the
campaign or something else?" Excellent point, Simon.
Typically, we found that "something else" to be the
site's anaemic CR.

LEX HENKELS <Lex_at_GetCustomerTraffic.com> ALSO WROTE:

>Purchasing traffic on GoTo works; it produces results
>quickly.

>However, it is expensive. A better long term strategy
>might be a competent optimization of the site to attract
>visitors through directories and search engines, while
>using purchased traffic to stimulate business until
>the optimization takes effect.

While I'd strongly agree that combining a PPC (pay-per
click) campaign with a SEO campaign approaches the
optimal marketing Big Picture, I'd disagree that PPCs
should warrant only short-term consideration. The
excellent resource PayPerClickSearchEngines.com now
lists 87 of them out there -- it's NOT just GoTo
anymore. Though PPC engines are, indeed, capable of
delivering relatively high quality (somewhat more
targeted) traffic in a matter of a few days after
setting-up an account and registering bidded keywords,
they certainly can continue to represent a favorable
overall ROI in the long-term -- IF properly managed.

GoTo's minimum bid of $0.05 has given pause to most
small business advertisers who are obliged to calculate
a ROI for that advertising expense. But, nearly all
other PPC engines [still?] allow a $0.01 initial bid
and bid increment per keyword, a few even lower than
that. No paid-for visitor who becomes a customer is
too cheap to mess with.

As an anecdotal but true example, a campaign for a
client in one of the lesser-known PPCs delivered around
200 click-thrus in one month at an average CTR
(click-thru rate) of $0.03. Not bad IF the web site
is generating a respectable CR. But even $6 for 200
visitors becomes a dubious expense if the site is
failing to make the sale.

Thoughts:
-- Combine for the long-term ALL marketing tactics
   that deliver (and continue to deliver) a good ROI.
   Calculate and KNOW.
-- Figure ROI as a percentage: Spent x Earned x 100
   (Earned = Gross Profit for each marketing campaign)
   and settle for nothing under 500%. Every $100 spent
   should generate a minimum of $500 in sales.
   ($100 x 500% = $500).
-- If overall ROI is under 500%, find out why. You may
   be either over-bidding your calculable "Bid Cap" in
   the PPC engines, or the web site's Conversion Rate is
   too low. Most often, we've found that it's the site's
   CR. If your site's CR is under 2%, suspect the site
   itself as being the weakest link.

Obviously, there are other important factors to consider
in calculating a sensible ROI for each business and each
campaign aspect. A most important one would surely have
to be the Profit Margin one has in the average sale. A
$0.50 bid (or CPV/CPC) in a PPC engine might be tolerable
for one business' profit margin, but a killer for another's
slim one. For PPC engines, know your Bid Cap relative to
your Profit Margin (and site's CR) to control that ROI.

Best of luck to all. And thanks to Tenagra for the A-O
forum to swap thoughts and ideas. Fertile ground.

Steve Harrison ~ Pay-Per Master
http://www.paypermaster.com/bidcalc.html
merlin_at_paypermaster.com



Received on Thu May 24 2001 - 11:15:25 CDT