The most common question I get is:
How much does the search engine optimization cost?
The cost of SEO is in most cases far greater than the majority of those who asked me imagined. For some reason there is a huge percentage of people who not only think but are convinced that they should be able to get on top of the search results in Google, for next to nothing. The majority of those who had their web site designed by a younger family member or some student for a bit of cash, really strongly believe that the cost of search engine optimization should be the fraction of what they paid for the web site.
I wrote in a post SEO Budget, about the search engine optimization costs and how to estimate it.
Search Engine Optimization Cost is Determined by YOUR Marketing Goals
Do you need 100 or a 1000 visitors to look at your web site every day? The difference is 10 times in those two examples. The search engine optimization cost will be almost 10 times different to achieve those two marketing goals.
How Many Web Site Visitors do You Need?
Calculate your web site conversion rate. Let’s take it for example that you need 100 web site visitors to make one sale. Your conversion rate is therefore 1%. Now, how many sales do you want to make every day? 50 Sales? 50 sales times 100 visitors per sale equals 5000 unique visitors a day. You can calculate it for your site with the same formula.
Web Site Revenue
Now let’s take web site revenue into the equation as well. Imagine your revenue is 100 per sale. 50 sales from 5000 visitors a day with the conversion rate of 1% is 5000 a day. Note that if you manage to change the conversion rate for just 1% higher, to 2% your revenue doubles to 10000 with the same 5000 visitors, and therefore the same search engine optimisation cost.
What is your Profit per Sale?
Let’s say that your sales costs eat half of the revenue and your profit is 50. 50 sales a day and your profit is 50 on each make the daily profit of 2500.
Now let’s look at those figures on the annual basis. We had a web site with 5000 visitors with 1% conversion rate. Each sale is worth 100, and sales cost deducted the profit per sale is 50.
1 day: 50 sales of 100 each make 5000 in revenue with 2500 profit.
1 year: 18250 sales of 100 each make 1825000 in revenue with 912500 profit.
The number of unique visitors was 5000 a day so therefore 1825000 visitors in the whole year.
What is the cost of a visitor?
The cost of a visitor in search engine optimization is a theoretical figure. The cost per visitor can only be calculated in the search engine marketing terms. In the example above where there is 912500 a year profit and we know that to make that profit we require 1825000 visitors, we can simply divide the required number of visitors by the profit (marketing budget in SEM terms) and get a cost of a visitor of 0.5. That number is a defining number if the search engine marketing can or cannot be used to drive traffic to our site. If the traffic can be bought for less than 0.5 the business will be profitable. If the average visitor costs more than 0.5, the business will be in red by the end of the year.
As well as the cost of the visitor from the search engine marketing perspective, from the search engine optimisation perspective we can calculate the value of a web site visitor. It is again the same in the sample above 0.5.
How to determine the search engine optimization cost?
In the sample above there is 1.8 mil visitors required to generate 0.9 million in profit. If spread evenly during the year this means we need 5000 visitors a day. Divide the profit by the number of visitors per day and you get the value of each daily visitor of 182.5. This means that if you can pay your search engine optimisation less than 182.5 per the single unique visitor a day you will be making profit. If you are paying more you will end up in red.
NOTE: See the post about: Search Engine Optimisation vs. Search Engine Marketing.
Let’s get back to the beginning and compare the business running with investing in SEO and in SEM. You know your market so ask yourself a question:
Is it likely I will be able to pay 0.5 per click (per visitor) for a sale worth 100?
In my opinion there are not that many examples where this is possible. Now let’s look at the SEO avenue, and ask yourself if you know of a SEO company who will bring your 5000 unique visitors for 0.9 million? Now I know many SEO companies that would do it in many markets.
And now the fun part. Year 1 ended. The second you stop paying your SEM your business is on the flat line. With SEO the truth is that on the last day of year on and the first day on year two you will make the same profit, without paying anything for SEO. The search engine optimisation investment is a long term investment. When you build you rankings and inbound links, you will not really lose that traffic that quickly. At the end of the second year, you will even without investing anything in SEO still have some two thirds or more of the traffic you started the year with.