PPC, SEO and Social Media ROI Mysteries Exposed
Working for a digital marketing agency, one of the most frequently asked questions is about the ROI (return on investment) of a prospective client’s marketing campaign. Fair enough; that’s a very valid and legitimate question. Anytime an individual or corporation considers making an investment, he needs to carefully consider the amount he is investing and the possible return on investment. Marketing is a crucial investment that must be made by business leaders. Additionally, shareholders or business owners need to determine if a certain ROI makes economic sense. From my own experience in working with large brands, there is usually a target of a 15% increase in sales, year over year. Therefore, the marketing campaign would have to contribute a large enough increase to boost the businesses’ overall sales by 15%. What many brand owners fail to realize is the difficulty in predicting ROI when it comes to certain types of marketing campaigns. Let’s take a look at some of the more popular ones below.
ROI of PPC – Success in a Tried & Tested Model
With PPC, it’s actually rather easy to make an educated guess on the ROI of a campaign using existing metrics. In order to calculate the ROI of PPC, you would need to know the current volume of site visitors, the average order value and the conversion rate. Based on those metrics, you can make a fairly accurate estimate of potential ROI by looking at how much it would cost to acquire additional visitors and using the average order value and conversion rate of previous sales. While the estimates may be off at the beginning of a PPC campaign, the longer you run the campaign, the more data you will gather – providing for more accurate data analysis in the future.
ROI of SEO – Putting the Pieces Together: Unlocking Projections from Unknown Numbers
Here is where it starts to get tricky. Let’s assume we already have plenty of data (like the number of organic visitors, the average order value placed by an organic visitor and the average conversion rate of organic visitors). Now all we need to do is figure out how many new organic visitors we can drive. Seems simple enough, right? Nope! What most people fail to realize is just how many different factors are involved in trying to make such a prediction.
The first thing to note is that search rankings will vary for different people based on factors like whether they are signed into Google or from what location they are searching. There are other variables I believe impact rankings but since Google’s bread and butter is based on its own algorithm, they guard it as closely as the formula to Coca Cola. These variables may include whether you have visited a specific site in the past, how much time you have spent on it, etc… As an example, I had a friend search Google for “cars for sale” from one state and I searched from another state. When we compared results, they were very different. This is why the whole notion of concentrating on “keyword ranking” is erroneous. Google has helped validate this statement through their recent actions of encrypting user searches. Google used to have unencrypted searches that would pass keyword data to Google analytics so marketers can use them for their analysis. Since Google’s change, however, these keywords are now returning as (not provided) where they claim this was done for privacy reasons. Additionally, Google recently tweaked their algorithm to penalize websites that are “over optimized.” One example of this over optimization is a high number of exact match anchor text links. While we can still guestimate the keywords driving traffic based on the increased reporting in webmaster tools and landing pages in Google analytics, Google has clearly indicated that marketers should not be concerned with keyword ranking so much as they should be concerned with providing a good user experience.
The other problem with predicting keyword rankings is the impossibility of actually predicting them. If you find an agency that will guarantee you a top 3, 5 or even 10 position on Google, they’re likely engaging in black hat SEO tactics giving temporary results with high risk of getting banned or their extent of SEO knowledge is limited to predicting the next animal Google will name their algorithm update after.
Assuming, arguendo, that we are able to predict with a reasonable amount of certainty what position we can rank your keyword for, we still have the challenge of figuring out the amount of visitors that the keyword will drive. Just to show you how difficult this can be, two different companies conducted a study to determine the percentage of traffic by Google results position. According to Chitika, Google drives approximately 32.5% of the traffic to the #1 ranking. According to Compete, that percentage is 53%. In addition, there are many different trends (seasonality for example) that will affect the search volume (the amount of people searching every month for a particular keyword). So what does all of this mean? Well, basically, the odds of an agency accurately predicting your ROI on an SEO/content marketing engagement is about as good as having predicted that the Red Hot Chili Peppers (who faked their half time performance) would have a better Superbowl appearance than Peyton Manning and the Denver Broncos.
So what about agencies that actually provide an ROI on SEO? They are generally forced to do so when a prospective client requires this as part of their consideration when determining who to hire. The ROI provided by the agency is likely based on the aggregate SEO work they have done for their clients in the prior year. Unfortunately this is a risky proposition and doesn’t provide an accurate analysis, as there are many variables here as well. For example, the nature of the business, the seasonality, the budget, etc., all affect an ROI – so using a small sample of historical data is just useless. Just to be on the safe side, agencies may add in a wide range in its numbers to have lots of room for error in the projection.
Finally, I don’t mean to offend anyone with my next statement, as there are exceptions (concentration on branding is one of them), but my philosophy is as follows:
Uneducated companies care about rankings. Average companies care about traffic. Smart companies care about revenue.
ROI of Social Media – True Value Exists in the Intangible, Unquantifiable Data
As I just pointed out in the ROI analysis of SEO, it’s basically a crapshoot; a bunch of estimations based on assumptions and hypothetical numbers. So what does that mean for the ROI of social media? Well, in comparison, predicting the ROI of social media is more akin to accurately picking a perfect bracket for the NCAA men’s basketball tournament. For those of you who don’t follow basketball and can’t comprehend how difficult it is, the odds of picking a perfect bracket are about 1 in 128 billion. The good news is that if you do manage to pick a perfect bracket, Warren Buffet will pay you 1 billion dollars. Ok… so I may have exaggerated just a tad, but the difficulty of making such a prediction is pointless.
While there are many tools that are able to measure the value of social media visitors, restricting an ROI analysis to this limited definition of social media does a great disservice to any organization. Social media is more about the intangibles like branding, relationships and good will that cannot be measured by a tool.
When confronted with a question about the ROI of social media, Gary Vaynerchuk (social media expert) famously fired back, “what is the ROI of your mother?” Obviously a mother is an important parental figure in the upbringing of her children. As a result of successful parenting, those children will grow up, get a job and make money. It’s obvious that the mother contributed to this success, but how can one possibly calculate her ROI? What about that lawn sign in front of your business…what’s the ROI there? How about the color of your office furniture? Get the drift?
So what is it about social media that’s so different than other forms of marketing? Social media, unlike many other marketing channels, does not work on a hit-and-run approach. It’s a channel of communication between your business and your customers. The entire concept of social media was designed to connect friends and family members with one another. Naturally this evolved to include businesses so that they could provide social networking companies with the revenues to continue with their efforts. Unfortunately for those businesses, consumers are tired of seeing ads. They are constantly inundated with various forms of advertising to the point where they are becoming immune. This makes it difficult for marketers to capture their attention and requires them to keep coming up with new techniques and strategies.
Fortunately, social media marketing can still be extremely effective if properly utilized. What this means is you need to throw the entire concept of “social media ROI” out the window. If you want to increase traffic, sales and profit, you need to start by providing value to your customers. At the end of the day, customers pay you money because you provide something of value to them. Social media works in a similar fashion. You need to provide value to your friends, followers, etc…, before you start requesting something in return. Too often I see social media accounts that do nothing more than promote their own products or services. That is the quintessential definition of selfish marketing. You need to engage your fan base, talk to them, help them, and provide them with amazing content. You need to establish a personal relationship with each and every one of them that attempts to reach out to you. Social media is actually an extension of the #1 form of marketing that exists out there: WORD OF MOUTH. Your fan base can make or break a business. Don’t believe me? Read about Amy’s Baking Company and some of the aftermath.
This is why organizations utilize the help of digital marketing agencies like IMI. It can be a daunting task to keep up with the demand of a popular brand’s fan base and connect with fans on a 1 to 1 basis. There are also many different facets to social media marketing. These include grooming relationships, constant monitoring, and even social conquesting, which is listening to people who aren’t even talking about your brand, but perhaps a competitor. While the investment may be great, the return is unquestionable when done properly.