The Future of Advertising

For anyone who is interested in the future of advertising, I am going to be giving a short talk on the subject at the New York Future Salon meetup tomorrow. And if advertising does not excite you, there will also be other cool topics on the agenda such as future connectivity, Internet governance, and decentralization.

Full details are available on Meetup.com, but here is the time and place:

• Stone Creek Bar
  140 East 27th Street
  New York, NY 10016
  (between Lexington and 3rd Avenues)
  
• Saturday, September 20th @ 4pm

Value of Search Engine Traffic

SEO firms often struggle with measuring and communicating the value of their services. Often times they give good qualitative reasons to go with their firm but ignore hard numbers that could help close the deal. As marketers become more accountable for ROI of initiatives such as SEO, it will be important for SEO firms to give accurate projections on how much value they can offer.

So what are the best ways to put a monetary value on natural search traffic? Is it enough to tell a prospective client that your firm can get them on the first page of Google for “xyz widgets”? They may be more concerned with how many new customers you can bring them or how many new leads they will get after doing SEO. Going forward, the discussion will be less about specific rankings and more about the actual ROI from natural search traffic converting into sales or leads.

SEOMoz has a great post on the opportunity gap which is the difference between the status quo and where they could be in terms of search traffic. It’s important to tell prospective clients how much money they’re leaving on the table by NOT doing SEO.

The first step is to figure out how your prospective client measures success – is it simply higher rankings on benchmark keywords, more conversions, more pageviews, or something else? The next step is to ask them specific questions about their current situation that will help you predict what you can do for them. For example, ask them what their current conversion rate is for their existing traffic. Also ask them what % of their overall traffic comes from natural search? If they are willing to tell you this during initial discussions, then you can give them a pretty good estimate on ROI.

The next post will walk through some very basic examples.

Calculating Natural Search Value

As a follow up to the post on the Value of Search Engine Traffic, here are some very basic ways to calculate the value of SEO for two types of prospective clients - eCommerce sites and Publishers.

1) eCommerce site (conversion rate x average order value)

Simple Example:

Current conversion rate: 3%
Average order value: $20
New search traffic due to SEO (per day): 8,000 visits *
Total new Revenue from SEO (per day): $4,800

Assuming the client does nothing to improve their conversion rate (i.e. reducing bounce rates, streamlining the buying process), they can expect $4,800 per day in additional sales after doing SEO.

2) Publisher (ad impressions x CPM)

Simple example:

Ad impressions per day: 50000
Average CPM: $5
Ad revenue per day: $250

Projected impressions after SEO: 90000
Projected ad revenue per day: $450

* The simple calculations above don’t account for the difference in click-through rate from securing a #1 position vs #7-10. As you know, the CTR for a top listing is much higher than the CTR for a lower ranking. This should be factored in when you are estimating how much new traffic your company can deliver for a client.

An alternative approach that HitTail Premium uses is to measure natural search traffic based on the Cost per Click values from Google AdWords. For example, we can count the number of visits to your site as a result of organic search and multiply that number by your average CPC to come up with a monetary value for that traffic. While this isn’t completely accurate given the variance in keywords and their respective prices, but it does give you a ballpark estimate on how much money your search traffic is worth.

These exercises are useful to show the opportunity cost of NOT doing SEO. Often times, winning SEO business is a matter of showing an executive how much money they’re leaving on the table by NOT doing SEO.

Feel free to add in comments on other ways to assign a monetary value to search traffic for different types of companies beyond Publishers and eCommerce sites.