The KPV Model for Evaulating SEO

Evaluating return on SEO Investments (ROI)

Preface

Determining ROI for investments in digital SEO efforts is notoriously slippery given that the best SEO techniques often take several months or more to prove and even then SEO efforts need to react to constantly changing search engine algorithms.

At the same time, most analysts find that organic search traffic far outperforms other traffic sources in terms of generating visits, engagement, revenue, and offline store visits through store locators and maps. For that reason, SEO investments should be front and center for any digital marketing efforts.

The most basic method for evaluating ROI for SEO investments is monitoring the growth in organic traffic (visits). However, this method is especially faulty since much of organic traffic consists of “branded” search, i.e. the name of the company is contained in the search query. Modern search engines are very good at ranking websites brand names so it would be foolish to invest resources in improving the ranking of branded keywords. Declines or increases in branded traffic result from lesser or greater brand awareness, which could be a function of offline TV or radio advertising or newspaper articles. Thus, to use total branded organic search visits as a KPI for evaluating SEO efforts would be a mistake.

A more useful broad measure of SEO return might be the rise or fall of “unbranded” keywords. For example, the keyword “new computer” is a much more valuable SEO target than the keyword “Dell computers.” Increases or decreases in unbranded keywords are much more useful as KPIs than branded keywords. However, all unbranded keywords are not alike in terms of website engagement, events or ecommerce transactions. They are also likely to be very numerous as a result of the fact that many organic searches are long tail phrases (“I want to buy the latest windows notebook under 2 lbs.”). It is actually fairly easy to optimize a website for specific long tail keywords. However, if the phrase is only searched 2 times a month on Google, it is unlikely to provide ROI for the special SEO efforts involved in optimizing.

Another method would be to take into account the number of times a keyword phrase is searched each month. One could also determine what it might cost to buy a visit for that keyword on Google or Bing. Volume multiplied by cost per click (CPC) would provide an indication of the value of the keyword. However, since visits from one keyword result in very different engagements, events or transactions, it is much more useful to take into account the value for each different keyword or phrase.

The “Keyword Potential Volume Gross Profit” (KPV) model was developed in order to allow the digital marketing manager to intelligently allocate investments in SEO vs. other avenues such as paid search, display, internal and external content.

Inputs

Organic traffic is comprised of a string of visitors that type a word or phrase into a search box (the keyword) that result in a click through to a webpage on a specific website that was listed in the search engine results. Historically Google Analytics and other website analytics software record the keywords entered into the search engine search box that resulted in a visit to the website. That specific keyword becomes an incredibly important metric in evaluating all kinds of digital marketing investments. There are even 1800 number phone services that integrate with Google Analytics and others to record a successful or unsuccessful outcome of a telephone call that was generated from a website page view.

Caveat: as web searches increasingly take place on secure pages (https protocol) as the user has logged into a search engine, the keyword is no longer passed to the analytics software because the https standard prohibits such information from being passed. As a result, the most popular organic keyword is now “[not provided].” Keyword analysis can still be performed, but increasingly the analyst has fewer keyword searches at his disposal. While analytics software is losing the ability to report on organic keywords, Google continues to expand keyword reporting in its Webmaster Tools service. Increasingly, web analysts will have to depend on Webmaster Tools reports to get insight into the organic keywords that brought users to the website.

Keyword (K)

The first input in the KPV model is the keyword or “K” that we would like to evaluate. Since many website receive thousands of unique keyword searches each month, typically we will confine our analysis to a short list of keywords that we believe are important to the business.

We then want to determine the average ranking and the “impression share” on Google for the keyword of interest. This information is contained in Google’s Webmaster Tools. We need these stats to be able to complete the “PV” or “potential volume” section of the model. Potential volume is the softest metric in the model since different keywords will gather different “impression shares” depending on the degree of congruence of the website to the user’s query. For example, a branded search for “Resolute Digital” which is listed first on Google search results, has a click through rate (CTR) of 68% because a user who types in this phrase clearly has the intention of visiting the website. But a search for “digital agencies”—and assuming that Resolute Digital achieved the same #1 position—will produce a much lower CTR—something in the vicinity of 10–15%—because the search query is related but not exact in its meaning.

For the purposes of our model, we calculate potential search volume for unbranded keywords according to the table below:

Search Result Position SV % Estimated SV
1 – 3 15% KV * 0.15
4 – 6 7% KV * 0.07
7 – 10 3.5% KV * 0.035
11 – 20 0.5% KV * 0.005
21 – 100 0.1% KV * 0.001

Keyword Volume (KV)

Each keyword is searched a specific number of times each month and Google is kind enough to share the number of Google searches through its AdWord Keyword Planner. Using the Keyword Planner, we’re able to get the value KV which is equal to the number of times the keyword is searched in Google each month.

Gross Profile (GP)

GP in the model refers to the specific gross profit that is earned to the specific keyword when a visitor comes to the website from the specific organic keyword search. The GP could be determined by the average gross profit on all of the items purchased by visitors on that keyword in the previous month. Or, it could be based on a broader measure of values which might include the economic value assigned to all “events” that occurred in addition to commerce transactions so that we could take into account high value engagements (> 4 pages per visit), store locator lookups, “map” to stores, Facebook likes and others. Thus the value of a keyword phrase might be calculated as follow:

Keyword: “mattresses”

Ecommerce

Ecommerce Transaction Value Per Visit* $3.375
Average value of a transaction $425.00
Gross Profile per transaction $225.00
Conversion Rate 1.5%
* $225 × 0.015

Store Locator

Store Locator Value per Visit* $6.00
Store Locator Lookups (% of visits) 12%
Percent of users who visit store after look-up online 40%
Average in store transaction $800
Gross Profit per store transaction $500
Conversion rate in store 25%
* 0.12 × 0.40 × $800 × 0.25

Other Metrics

Value of a Visit from the Keyword “mattresses”* $10.127
Facebook “Likes” $2.00
Likes as a percent of Visits 1%
Value of a Like per Visit $0.02
High Engagement Visit $5.00
High Engagement as a percent of Visits 15%
Value of a High Engagement Visit $0.75
* $3.375 + $6.00 + $0.02 + $0.75

Application of the KPV Model

Using the methodology above, potential ROI for SEO investments can be calculated for each targeted keyword. The value for each keyword is entered in a table, as shown below:

Keyword GP per keyword Google Search Volume per Month Current Rank on Google Target Rank Expected Visits at Target Rank Current Google Organic Traffic Expected increase in visits target rank over current rank Value of increased traffic per month SEO Investment required (total) ROI (12mts value dividied by investment)
mattresses $10.17 55,000 12 5 5,500 3,850 1,650 $16,780.50 $30,000.00 6.7
mattress $9.25 37,500 8 5 3,750 2,625 1,125 $10,406.25 $20,000.00 6.2
buy a mattress $6.80 17,500 3 1 2,625 1,225 1,400 $9,520.00 $20,000.00 5.71
cheap mattresses $4.25 12,500 1 1 1,875 1,875 0 $-
foam mattress $5.50 18,250 25 10 1,278 183 1,095 $6,022.50 $10,000.00 7.2

Summary

Using the KPV model, we now have a framework for evaluating SEO investments. SEO investments can be considerable since making a website more SEO friendly involves structural changes to the website that in turn require the work of the internal IT department and programmers whose labor is expensive and difficult to schedule.

Once a website is SEO friendly, building quality content (as Google is fond of saying, “content is king”) requires the manual labor of editors and writers who also need to be trained in SEO principals such as using targeted phrases in article titles. There is also considerable labor involved in keeping social sites and blogs up to date and relevant.

Out model assumes a 12-month value for the additional visits generated by the specific keyword. The payoff time period could be either longer or shorter depending on client preferences.

While the KPV model does include some soft variables, we believe it is a much sounder framework for evaluating SEO investments than much more simplistic organic visits growth or average rankings by keywords.

Author
Dan Savage
Managing Partner
Posted
10.15.13
Dan Savage
Managing Partner

Daniel Savage has been an expert in SEM, SEO and digital marketing analytics since they were first introduced to the marketplace. As CEO of Thomas B2B, Dan managed the first pay per click advertising service focused on the B2B market. Today he has a comprehensive knowledge of every search marketing tool and trick on the marketplace, but prefers to develop his own proprietary algorithms, bid management software and custom code.

Contact Dan