Yes, You Can, So Should, Predict ROI of Web Marketing

Most businesses know they need a website and search marketing, so many just do it. But there’s a huge range in how much you can invest. Seeing the likely profit scenarios will enable you to invest wisely.

Predicting Profit of Web Marketing

See Your Profit Before You Invest

The fact is that, with professional help, you can predict the ROI of most web marketing. Let’s take PPC as an example. One can ascertain:

  • Average click costs
  • Past conversion rates
  • average revenue and profit per order or lead.
  • Past conversion rates of leads
  • And a few other relevant stats, like return rates and subsequent organic and social traffic. 

Increasingly my firm insists on such predictive analytics prior to a full engagement. We want to help clients, and predicting ROI ensures that we will.

How Should You Budget for Digital Marketing?

Short answer: like you do for everything else–create an annual budget.

Determining Your Digital Marketing Budget

Determining Your Digital Marketing Budget

Search marketing channels and tactics proliferate so that only the largest companies can do it all in one year. Prioritizing and then estimating labor time and vendor costs will produce your annual budget, but that requires rare breadth and depth of expertise. Instead, look to the average of what businesses spend on digital marketing.

SBA.gov suggests 2% to 8% of revenue for marketing, not including sales people’s salaries, depending in part on how new your business is. Start-ups often exceed 40%.

This Gartner study on digital marketing budgets is one of the best and reveals that on average US companies spent 2.5% of revenue on digital marketinggartner.com digital marketing spend report.

Regarding the percent of marketing that goes to digital marketing, this article is worth reading: avalancheinternetmarketing.com – determine internet marketing budget. It shows the following average percent of revenue budgeted for marketing and then digital marketing.

  • B2B companies: 5% on marketing, 21% of that for digital marketing, or $105,000 per year per $10 million in revenue.
  • B2C (consumer) companies: 15% on marketing, 21% of that for digital marketing, or $315,000 per year per $10 million in revenue.

Of course no business is average. Myriad factors in the marketing environment and in the growth stage and kind of a business justify wide deviations from those averages. In 2012, Converse put 90% of its marketing into digital; Lexus 70%. My firm has a client in the housing business who, in the housing crisis, moved 100% of marketing into digital, mostly search marketing, and thereby survived to prosper when the market improved–with many competitors out of business.

It’s not clear to me whether the averages revealed in the above article include all website costs or only costs related to marketing the website, like conversion rate optimization. But even if it includes all website work, digital marketing consumes a substantial and rapidly growing piece of the pie.

In a sense, all web marketing, not just PPC, is a bidding environment. If your competition is behind the curve, you can spend less than the applicable US average.

My blog post about Resisting the Decline in Search Marketing ROI for Small Businesses and my Visibility Magazine article on the Freakonomics of search marketing show that if a mere 1% of 1000 competitors for your search terms invest sufficiently, your search marketing competition increases 100%.

In theory the day will come when the ROI of search marketing will be on par with non-digital marketing because enough firms do the math that shows how much to invest. This in turn will bid up the costs, and thus depress ROI, so that radio, TV, newspapers, magazines, trade shows and other “old-fashion” marketing will be equally or more cost-effective. That day, if it ever comes, is still a long way off. Meanwhile, smart marketers will increase digital marketing budgets, and earn handsome returns quickly.

Resisting the Decline in Search Marketing ROI for Small Businesses

Sunrise or Sunset for Small Business ROI in Search Marketing

Hope Shining through Dark Clouds for Small Business ROI in Search Marketing

This post summarizes and reflects further on Rob Laporte’s “The Hard Freakonomics of Search Marketing for Small Business,” published in the Winter 2012-13 edition of Visibility Magazine.

Hard Freakonomic consequences follow from the fact that display systems and the brain deal with only a few search results per search. The “top ten” means that if 1% of 1000 websites with similar keywords/topics/offerings invest sufficiently in SEO, then competition for any one website increases 100%. That is, 1% of 1000 is 10, which is a 100% increase in competition for the top 10 positions.

Yes, this is simplified logic; in reality 50 competitors would do, say, 20% of all SEO they could do, rather than 10 doing 100%. But the principle remains essentially the same.

The same logic applies to PPC more obviously because of the bidding for ads. This logic applies less to conversion rate optimization because one is not constrained to the top ten positions to boost results. However, the usability grand master Jacob Neilsen argues that a mere 10% better usability in one site vs. another will soon result in something like 90% of the business going to the better site.

Coupled to this freakonomic consequence of top ten positions is that:

  • Profit from search marketing demands increasingly more time or money to deploy essential tactics and tools.
  • The losses coming from not doing the relentlessly mounting minimum in SEO grow because search engines increasingly demand that websites do more merely to be OK.

To counter this trend, the search engines and many search marketing firms have been working hard to offer economical solutions for small businesses. For example, Google Places and now Google+ for Business offer relatively simple and inexpensive ways to get local coverage. AdWords Express greatly simplifies PPC for small businesses. Search marketing firms and software providers offer relatively low-cost monthly payments for turnkey solutions.

However, putting on the Freakonomic goggles shows that these less expensive channels follow the rule that you get what you pay for. My article in Visibility Magazine substantiates the above points, and concludes that the best mitigation, but not elimination, of this set of problems entails expert prioritization of all web marketing options.

Another Ray of Hope

DISC’s social media maven, Jennifer Williams, counters this dark view of the future of small business marketing by pointing out that:

(1) The rise of non-search venues for small business, like Pinterest, Etsy.com, and social sites, transcend the “top ten” search results via a rich web of relevant connections.
(2) An emergent cultural rejection of “too big to fail” businesses will continue to give rise to searches for smaller and/or local businesses outside of and perhaps soon within the major search engines.

I bend to this argument, but I don’t break to it. Top mind share produces more mindshare in all search and social venues, just as Walmart has destroyed countless small businesses. Yes, driving distance does not matter much on the web, but top brands wielding top tools and minds have long been investing in local and social search. As much as Etsy has grown, the big etailers have grown much more.

Still, I’ve learned not to invest much hope in my disagreements with Jennifer, and she may prove right once again.

I’d be delighted to hear your comments below on this question of the future ROI of web marketing for small businesses.

What is PageRank Sculpting, and Why Do It?

PageRank-Pyramid

PageRank Sculpting Isn’t Easy

PageRank sculpting directs the flow of search engine spiders, indexing, PageRank, and other trust and authority assignations by using tools to open and close valves in the pipes of your website’s hierarchy. PageRank sculpting is vital to SEO management of large, dynamic websites, and it helps smaller websites doing redesigns. It is also crucial in dealing with Google’s Penguin and Panda updates. Visibility Magazine’s Fall 2012 edition publishing my complete guide to this highly technical topic. Here, I offer the big picture.

Google’s Matt Cutts noted the importance of PageRank sculpting, being sure to distinguish it from the bogus nofollow sculpting. (For more on this, see http://searchengineland.com/pagerank-sculpting-is-dead-long-live-pagerank-sculpting-21102.)

In PageRank sculpting, it’s important to understand the distinctions among spidering, indexing, and the passing of PageRank. Spidering includes a page in SERPs (search engine results pages), whereas indexing goes further to include the page’s words in the index, which is matched to searches. Pages can be spidered without PageRank assigned, and indexed pages may or may not get PageRank or pass it on to other pages in your website.

PageRank sculpting deploys standard tactics in combinations that should vary to fit each website’s CMS, navigation scheme, and budget. These tools are:

  • The robots.txt file
  • 301 redirects
  • Canonical meta-tags
  • Pagination with rel=“next” and rel=“prev”
  • The noindex meta-tag
  • X-Robots-Tag HTTP header directive
  • XML sitemaps
  • The nofollow meta-tag
  • Advanced and less essential tools (perhaps for a future post here) include cache controls, last-modified headers, the unavailable_after X-robots-tag, and a few others.

In addition to these tools, most of the standard rules of CMS-SEO pertain to PageRank sculpting.

(For an overview of CMS-SEO, see VisibilityMagazine.com/internet_marketing_magazine/previous_issues/html/december-2007 and VisibilityMagazine.com/disc-inc/rob-laporte/cms-and-database-seo-guide).

Choosing and coordinating the best PageRank sculpting tools for your website, and avoiding conflicts among the tools, is one of the most difficult jobs in SEO. There’s a need for an article or ebook which shows various scenarios and pitfalls. A good primer on avoiding conflicts is seomoz.org/blog/robot-access-indexation-restriction-techniques-avoiding-conflicts.

Once learned, it’s difficult to remember which of the tools block or redirect spidering, keyword indexing, and PageRank, and my Visibility Magazine article will serve as a reference. The important take-away in this blog post is simply to know what you don’t know.

The search engines will likely change relevant rules or become better at dealing with sites that have weak or faulty PageRank sculpting, but usually such changes are backward compatible (though recently Google has broken this implied contract with webmasters a few times). So, PageRank sculpting, like its parent categories of CMS-SEO and technical SEO, is an investment where you “write once, and profit in perpetuity.”

Bookmark this Graph that Encapsulates SEO Prioritization

Chart of SEO tactics by Cost-Effectiveness and ROI

From Marketing Sherpa’s “2012 Search Marketing — SEO Edition

This graph reveals in one view how web marketing managers should think about allocating resources among SEO tactics. Study it first, and then let’s talk (well, I’ll talk about it, and I hope to hear back from you).

This graph and the Marketing Sherpa survey it comes from illustrate the principle that you should allocate web marketing capital according to cost-effectiveness (with cost indicated by “Degree of Difficulty”).

The main weakness of this graph is indicated by the analogy that blending a lot of really bad scotches doesn’t make a good cocktail. In economics, for example, often the average of a bunch of economists’ projections proves wildly wrong, and likewise this study compiles estimates and less than scientific data. Similarly, a lot of beer drinkers used to like Pabst. Very few economists predicted the financial crisis (and I bet a lot of bad scotch and cheap beer was consumed as a result!). Still, I believe that this graph does a good job of suggesting how on average you should invest in various SEO tactics.

Of course on average, all women are about 1/50th pregnant. That is, your particular business situation and the web marketing work your team already has done well could make your optimum allocation differ tremendously from what this graph suggests.

What remains true for you, however, is that you should think about your web marketing according to the principles and categories of tactics illustrated in the above graph.

Should Search Marketing Firms Give Short-Term Loans to Clients?

Loans and Banking in Search Marketing

The Global banking crisis prompted me to contemplate whether search marketing firms – or for that matter any professional services firm — should loan money to their clients.

The practice of firms loaning clients money under 30 to 60 day terms is so common that it suppresses the kind of clear thinking and analysis that banks undergo when making loans. Should firms practice such “banking” with clients, and if so, what are the advantages and disadvantages for both firm and client.

Debt and Loan Agreements in Search Engine Marketing

Pulling this issue out of the shadows of oblivious convention into the light of clear reason reveals that there exists scant rationale for this practice. Let’s list and debunk common rationales.

The Client’s Rationales for Borrowing from the Firm

  1. When a firm begins a job prior to payment or continues a job prior to payment for past work, the client can begin or continue the job prior to the arbitrary date of their periodic check runs. This is a flimsy rationale because in fact companies can, with minimal effort, write and send checks outside of their normal check run cycle. True, many larger companies have a purchase order system that is not easily circumvented, but if the job is urgent, the company can circumvent this system. If they can’t or wont, that’s the cost of bureaucracy.
  2. By paying the firm after work is done, the client has leverage to ensure proper completion and perhaps to argue for additional work that may not be part of the original agreement. If the client has chosen a firm that needs such leverage, the choice was probably poor. True, even the best choice of a firm does not eliminate risks that the firm is worse than it appeared or that the firm will assign their least skilled employees, so financial leverage offers a reasonable insurance policy. Yet consider that good law firms are almost always paid by up-front retainer, whereas struggling law firms may break from that payment convention – and the firm may be struggling because it is not very good. Especially in a growing field like search marketing, if a firm offers the client credit in order to do business, maybe that firm is not a good choice after all.
  3. By paying in, say, 60 days, the client’s CFO has more money to play with. I’m not experienced in corporate accounting, but it seems to me that, especially with today’s interest rates, 60 days earns little or nothing — certainly not enough to justify the possible exclusion of the best search marketing firm.
  4. I can imagine that clients’ CFOs would gain other advantages beyond mere interest when delaying the payment of vendors for weeks and months. The question is, do these advantages justify to the firm the extension of credit prior to work? Let’s take a look at the firm’s point of view.

The Firm’s Rationale for Loaning Money to Clients

  1. If the firm does not have enough worked booked, then immediately using idle resources may be worth the risks (discussed below) in loaning the client money.
  2. Extending a 30 or 60 day loan to a client creates trust and a feeling of good will. This may or may not pan out. I would hope that the predominant grounds for trust and good will emerge from other aspects of the business relationship and don’t depend on cash. Buying favor usually does not curry genuine favor.

Unless the firm runs a credit check on the client (much like the client checked the firm’s references), the obvious risk to the firm is that the client defaults for any number of reasons. The client might go bankrupt. Or the client might be owned by a parent company that takes the cash and nullifies (legally or not) vendor contracts. Or the client may simply have late if not patently abusive payment patterns at odds with the firm’s contract. In such cases, the firm may have to spend valuable time performing collections, or, worse, may have to battle it out in court. Complete default is relatively rare, but the consequences are large, so the the firm should minimize such risk.

“Everything is a Situation”

Of course if the client pays in advance, the client has in effect lent money to the firm, until the firm works that payment off, and then a new “loan” from the client begins. However, if the client checked the firm’s references and the firm did not run a financial check from the likes of Dunn & Bradstreet on the client, then a few weeks of paying in advance is probably fair.

This analysis seems to have revealed that law firms’ tried and true practice of working on retainers should apply to web marketing as well. Of course a long-standing client with a good payment history or a new client recommended as trustworthy by a trusted colleague are situations where a relatively low risk loan is often the right thing to do. To quote a 1990s cop show’s frequent refrain, “everything is a situation.”

Remember GE

The recent history of General Electric adds a final moral gloss to this meditation on money and banking in search marketing. A huge part of GE’s business was banking. GE lent money to clients to buy GE’s products and services. Shortly after the inception of the financial crises, GE needed a government bailout. GE’s stock price tanked, and now hovers at barely a third of its pre-crisis heights. The world groans under its insane debt. Increasingly I’m in favor of having clients pay when they have the cash and avoid debt. That’s how my firm has proceeded for years when paying our vendors, and as result we are one of the few small businesses offered ample lines of credit — that I hope I’ll never use.

Should You Pay for an Initial Web Marketing Consultation Prior to a Proposal?

Handshake for a Web Marketing Proposal

You and I paid for this graphic, by federal taxes to the FDIC website.

A paid initial consultation in web marketing prioritizes what you should even consider, projects ROI that you can later track, and thus produces a proposal honed to your precise needs.

In theory, an initial free consultation can do the same as a paid consultation, but in reality the proposing firm’s incentives often undermine the value of a free consultation because:

  1. The good search marketing firm is likely to enjoy plenty of demand, so unless your business is exceptionally large or otherwise desirable, the firm won’t spend much time on a free initial consultation — at least not by the principles of the firm who know the most.
  2. The not so good firm or one that aims to expand rapidly by selling a lot and using a factory model of lower-wage, lower-skilled people has the incentive to make the consultation little more than a proposal that prioritizes by what they sell, not by what you need.

A good paid initial consultation will give you plenty of value that stands alone, regardless of whether you do further work with the firm that did the consultation. That is, the resulting report will prioritize by projected ROI the several search or web marketing channels you should consider, and then you can ask several firms for proposals that address the priorities.

How much should you spend on an initial consultation? Obviously that depends on how many web marketing channels you want to prioritize and on the amount of time devoted to gathering and calculating data by which accurately to project ROI. At DISC, for example, our minimum initial consultation in search marketing is $750, averages about $1400, and sometimes exceeds $2500. Our minimum initial consultation in social media is $525, and our social media marketing plans average $2450. Other factors influencing the cost of an adequate initial consultation are the keyword diversity of your offerings, the extent of your past data on traffic, conversions, and profit, and how many in-house employees and weekly hours per employee must be considered in the cost inputs within the ROI projections.

If you know exactly what you want from the firm, then the initial consultation, free or paid, is probably a waste of everyone’s time.

You can always invest more in SEO copywriting, SEO recoding of your CMS, pay-per-click, shopping comparison site marketing, social media marketing, conversion rate optimization, email marketing, and refinement of analytics and reporting, but if you’re sure that you need only one of these things (that it would deliver the highest return on investment), and if, even better, you know exactly what you want to do within one of those channels, than any good firm should be able to provide a well-suited proposal without the need for much if any initial consulting.

Unlike the earlier days of search marketing when now antiquated conventions of proposals and initial consultations formed, now the complex array of options and their varying applicability to each business and website creates a more nuanced dynamic — perhaps a game theory dynamic — during your first contact with prospective web marketing firms. That complexity and those dynamics place a premium value on the experience and trustworthiness of the people who will guide you to your proposal.

How Simple Can You Make ROI Reporting for Search Marketing?

Google Analytics and paid software like Omniture provide tons of potentially useful information, but the amount of information can overwhelm and paralyze if you don’t distill it into a minimal executive summary.

While every business has unique needs for metrics, all businesses want to see the resulting cash, so I show a couple of spreadsheets that allow you quickly to input data from analytics packages to produce monetary ROI projections and results.

Below is an example of an Excel projection of PPC ROI. Research with Google tools and with the client’s server analytics produces data inputs, which can all be altered to play with scenarios. Of course you can input actual numbers once the campaign is live. This simple spreadsheet for a small business was further simplified and compressed to fit here, but serves to illustrate.

Clear, simple spreadsheet for chief executives and marketing managers who invest in pay-per-click advertising.

Sample Spreadsheet for Showing PPC Profits after all Costs

Of course marketing managers often want, and DISC gives, other metrics as well as a few paragraphs about strategies done and planned, but when very busy, the snapshot above allows you to move on down your todo list, and of course the projections help you decide whether or how much to invest in PPC.

SEO reporting should also be driven by monetary measures, as in the simplified example below, where we use 75% of the clients’s industry’s average $1 click cost as a proxy for cash value of each organic search engine click. This client already had excellent SEO and organic traffic before SEO, so while improvements were only 29%, the monetary ROI is good.

Clear, simple spreadsheet for chief executives and marketing managers who invest in search engine optimization (SEO)

Sample Spreadsheet for Showing SEO Profits after all Costs

Given the incredible stat packages out there (which we at DISC love), the above tables seem too simplified. Exactly!

Depending on your server analytics package, you can create such views within the package, rather then exporting to excel, but either way, your search marketing work can and should be distilled to show costs and profits in one glance.

Is There an Optimally SEO’d CMS & Ecommerce Platform?

Automating SEO Writing and Attributes within CMS's and Ecommerce Systems

Thomas Jefferson’s copy machine: Is CMS-SEO much better these days?

No, there isn’t.

It amazes me that, given the huge benefit of having a CMS and ecommcerce system automate SEO, no pre-built solution does so optimally.

DISC has reviewed many of the top candidates, and while some are better than others, and most can be coded for much better SEO, none has completely seized this huge opportunity to help businesses implement SEO programmatically.

This post won’t review the candidates, for that would take too many words. I can tell you that CMSs purporting to be ideal are not. A CMS that allows you to edit meta-tags and URLs is not close to enough. An SEO’d CMS should automate these and other SEO attributes, while allowing manual override. A site with several hundred or thousands of pages needs to automate SEO as much as possible, so that you don’t have to manually enter all SEO attributes. (Of course body text must be written manually – though there are ways to automate some body text SEO by using database pulls into SEO’d footer taglines and small paragraphs of recurring, product-variable text on each page). To get an introduction to principles of CMS-SEO, please see my two Visibility Magazine articles at http://www.2disc.com/about-us/press-and-media/visibility-magazine/cms-and-database-seo-guide-part-1/ and  http://www.2disc.com/about-us/press-and-media/visibility-magazine/cms-and-database-seo-guide-part-2/. These articles are about four years old, but the principles remain sound, while only a few details are dated.

DISC is currently building an SEO’d CMS based on osCommerce. This platform has the advantage of years of proven infrastructure, a large community, and some SEO modules that, properly adjusted, enable close to ideal SEO for e-commerce and large websites. True, like all platforms, osCommerce has some drawbacks, but accusing osCommerce of deficiencies is like accusing HTML of deficiencies: it’s not the platform so much as how you wield it.

DISC has SEO’d other content management systems and ecommerce platforms —  the choice of platform depends in large part on your particular needs. All in all, we’re finding osCommerce best for SEO in most cases.

I’d be grateful for your comments and suggestions regarding CMS-SEO platforms. Have you found a CMS that is great for SEO? Are you developing one that you’d like DISC and other firms to consider? Let’s chat (right here on this blog or via Rob@2disc.com or 413-584-6500).

There’s still an enormous opportunity for a firm to market an optimally SEO’d CMS and ecommerce system. DISC is building one now, but if anyone has one or soon will, I’d love to consider it, and perhaps review it here.

In SEO, How Much Should You Plan vs. Implement?

Planning SEO vs. Implementing SEO

Planning SEO vs. Implementing SEO

As SEO options proliferate, and as websites and their web marketing intricacies proliferate, an ever greater percentage of time should be spent assessing and prioritizing. Just plunging into this or that tactic may seem to save on overhead, but it can waste plenty more time than you’d spend in proper planning. This is especially true in SEO troubleshooting.

Contemporary SEO entails many parts, such as:

  • about 15 SEO technical tests;
  • about 30 CMS-SEO rules;
  • social media SEO, including blog and video SEO;
  • SEO keyword research and copywriting;
  • ROI reporting and subsequent optimization;
  • And much more.

What should you do first?

This planning time is especially important when troubleshooting sudden declines in organic traffic, such as many businesses suffered under Google’s new Panda regime. In troubleshooting, you must audit thoroughly, and since you must completely eliminate one after another of the possible causes of your losses, you must redress each possible cause 100%. If you do only 75%, then you’ll remain haunted by the suspicion that your continuing organic losses could have been solved by one of the tactics that you decided to only partly address in the interest of saving money.

Let’s consider and an example pertaining to database-driven websites. Software that mimics search engine spiders often finds problems in multiple URLs leading to identical end-pages. Although Google’s spiders are very smart and may overlook such issues, the cause of the website’s loss of organic traffic may be related to what the spider software found. Resolving problematic results of spider test can be expensive, and meanwhile other issues may be either primary or accessory culprits, like excessive intra-site links, or too much SEO writing, or a pattern of slow loading. (Often declines are due to several negatives, with one or two main problems pulling the lesser weaknesses into the vortex of Google’s demotion tipping point.) Each of the tasks in a troubleshooting list can take a lot of resources if they are to be treated 100%. Again, which should you tackle first?

This situation means that you can easily spend 40% of your budget running tests, estimating time and costs to fix each issue, multiplying costs by the probability that the weakness is indeed a cause of decline, and delegating who does what within the final prioritized list. While working on each item, people must keep good, time-stamped, detailed notes of what was done, so that, if more troubleshooting is needed in the future, people can double-check what was and was not done.

Success in business (and in society as a whole) is all about allocating capital efficiently. Planning your SEO assiduously will lead to such success.