Measuring Online Marketing Success - It’s Just Math People
Mon, May 11, 2009
Is that what our goals really are? Clicks? Hits? Pageviews? To me it sounds like either somebody bought some snake oil, or they’re just trying to sound like they know what they’re talking about. Come on, we’re all business people. We all should be trying to bring in one thing. More REVENUE.
Clicks, Hits, Subscribers, #1 Rankings, Pageviews, etc. are all just paths to your goal. It is appropriate to chase all of the above, but the amount of effort and energy you pour into each has to be measured against their actual value. And the problem I most often encounter is that people have a tough time grasping the actual value of different measurable key performance indicators. As an SEO guy, sometimes it goes against your gut to tell somebody that SEO is not always the answer. But if you’re a real business person who happens to be an SEO, you already know this is the case and you’ve probably told somebody that at least once before. Ranking number one for a phrase that generates no business is worthless unless it’s free.
So let’s make it easy and spell it out, line by line. This is a little guide on how to determine the value of your KPIs and to identify where your low hanging fruit is.
Define Your Multipliers
It’s fine and dandy to have reporting, but it doesn’t actually mean much without assigning monetary values to each metric. I like PPC a lot, so let’s start with that.
Google Adwords provides some neat campaign performance reports. You probably need to pull them daily if you’re handling a budget larger than a shoe string. To the average business person, it looks like a bunch of techie jargon. So you need to be able to quickly assign values to each metric.
Here are some common key performance indicators that I like to call MULTIPLIERS:
- Impressions
- Views
- Visitors
- Clicks
- Sign-ups
- Calls
- Prospects
- Leads
- Sales
- Fulfillment, Shipment, Funding, Disbursement, Mailout, Contract, etc etc (final stage)
Calling any of these “conversions” can make things confusing. The web guy might think a conversion is a click to a lead. But the sales guy says a conversion is a lead to a sale. The operations guy thinks conversion is a sale to a fulfillment. And the deacon thinks a conversion is a heathen to a choir boy. So we need to be clear and try to avoid the word conversion unless everybody already agrees on its meaning.
Assign Values to Your Multipliers
First, you need to know how much revenue you brought in for the time period you are reporting on. Let’s say you have 10 sales in a given reporting period for a PPC campaign. Your revenue is $1,000. You spent $400 on marketing costs so far. This scenario looks good, because your marketing costs are in the black and you have $600 to pay operating expenses and / or pocket. Divide the number of sales by your cost and you have a cost per sale of $40. Now divide your number of sales by your revenue, and you see your revenue per sale is $100. You’re making $60 a sale, which is a pretty good return in most cases.
It’s pretty easy to assign a value per sale. The neat thing is, you can use this same simple logic to assign values to any of your multipliers. To get your cost per action for any action in any campaign, divide the over all cost by the number of each action. So if it took 100 clicks to get those 10 sales, you know your landing page is converting at 10% and you know your value per click is $10. You use that number to guide your bidding. And to kick your web designer in the butt for creating a landing page that only converts at 10%.
For those not in the trenches of web marketing, I am over simplifying much of this. There are usually so many other factors to consider. Numerous buckets of keywords, multiple PPC channels, different conversion rates for each. And to make the matrix even more messy, different times of day, different cities, different days of the week, and different seasons will usually yield different conversion rates on each. Not to mention market AND marketplace conditions will affect all of these KPIs. Leads generated from the 3rd ad slot will probably have a different conversions than those from the #1 spot.
But that kind of stuff is why I get paid to manage stuff like this. To be really really good, you need to have a strong handle on all of those nuances.
Assign Actual Values to Your SEO Campaigns Too
It can be frustrating trying to explain the importance, or even play down the importance of SEO when talking in generalizations. Some people have it in their head that SEO is a magic bullet. This goes for SEOs and business people alike. But sometimes, let’s be honest, SEO is not the answer. If nobody is searching for your new invention, you’ll have to use other channels to generate market awareness before your natural search rankings will have real value. Or if you’re getting into a super saturated market which will take a ton of effort, time, money, or a combination of all three, then sometimes the return is not worth the investment. When making an argument either for or against SEO for certain verticals or keywords, knowing the approximate true value of those rankings will make all the difference.
Fortunately SEO is actually similar to PPC in the way you measure success. If you isolate your search engine traffic, especially keyphrase by keyphrase, you can get an accurate measure of conversion rates on your site. This might not be quite as simple as measuring conversion rates on PPC, but it’s pretty close. Close enough so that you can now take your revenue generated from that traffic, and divide it by the cost of gaining those rankings. Sometimes it’s easy; if you bought 10 links, and that’s all you did for SEO, then you have your true cost. But usually it’s more complex. You may have to take into consideration your time, your co-workers’ time, retained SEO services, publishing costs, content generation costs, and all kinds of other indirect costs that are associated with SEO. But once you have your actual cost, the rest is the same. If your revenue is more than your cost, clearly you’re on the right path.
Now that you know what your site’s conversion rate is for similar keyphrases, you can use search volume tools like Google’s keyword suggestion tool, and their trend tool to get click projections. The keyword suggestion tool shows actual search volume per keyword, which is pretty sweet. If you know where you rank for a particular keyword, you can use the data you have now on conversions, then divide the number of searches for that keyword by your actual clicks to get your click through rate. Once you have that, you can use the AOL search data to make some pretty strong guestimates on click volume for each of the top 10 positions.
After applying these methods, you should have a pretty good idea of how valuable that keyphrase actually is for your company. When you have a really strong handle on how much SEO will probably cost for new keywords (in both time and money) and you know what it will return, you can make intelligent and calculated decisions on whether or not to attack certain keyphrases. And you can speak in pure numbers, which makes things so much easier. And if your numbers are a wash, just remember if you’re breaking even on SEO costs now, in the future when you peel back, your rankings will still be bringing in business. Sometimes it’s worth the up front investment, especially if your company isn’t cash poor.
Again, this is an over simplification of a pretty complex matrix. There are still a lot of unknowns or in-exacts that you’ll have to have a pretty good handle on. For example, the higher you rank for a keyphrase, the higher your conversion rate on your site usually is. Traffic value from each of the search engines will be different. Your competition’s SEO efforts might not be as easy to detect initially, giving you a false sense of how easy cracking open a market might be. But these nuances, again, are the reason people like us get paid to manage this stuff.
// bio thingie-
This was a guest post by Chris Hooley, a Phoenix SEO. He writes pretty good posts, but really crappy bios. 
May 11th, 2009 at 7:54 pm
I would just like to point out, the person who wrote this posts has a pimp-osity only rivaled by the person that owns this blog.
May 11th, 2009 at 7:54 pm
I would also like to point out, my previous comment had a typo because I have 17 thumbs.
May 12th, 2009 at 10:26 am
quel bodacitude. good job hooley, thanks for sharing this
May 12th, 2009 at 7:10 pm
Nice post..The measuring online marketing success is mainly by the visitors who visit the site…It should be attractive so that, visitors become customer soon…Sales, funding and other thing are mainly reflect on the quality on the product…The feedback is very important to measure the online success…Because customer will contact the owner directly so we should maintain the smooth relationship…
May 13th, 2009 at 6:42 am
Bravo! The more people who understand that the platform and delivery method (be it print, web, ppc, cold calls, social media, word-of-mouth etc…) don’t change the fundamentals of business, marketing and metrics the better. “It’s Just Math People” is my sentiments exactly!
May 18th, 2009 at 12:24 am
“Some people have it in their head that SEO is a magic bullet.”
This phrase describes half the people i work with.
May 19th, 2009 at 12:53 pm
@an use the AOL search data to
that was new for me.thx for the post and hints!
May 19th, 2009 at 3:53 pm
Online success is a PR9 . With a 9 you can sell matches to the devil.
May 23rd, 2009 at 1:44 pm
This is really great and well explained. I’m sure some big corporations love this because they deal with hundreds if not thousands of SEO campaigns. But for the rest of us, the vast majority, I wonder if the time spent to analyze all the data is worth it.
May 27th, 2009 at 7:21 pm
I am using Google’s keyword suggestion tool, it is popular.
May 27th, 2009 at 7:33 pm
I’ve been doing SEO for my resume site for a long time. This is a real solid post. I wouldn’t call myself an expert, but I know a thing or 2. The biggest thing i’ve learned to to KISS. Measure the macro. If you change 1 thing, measure the end result on your bottom line whether that is traffic or sales.
May 29th, 2009 at 7:01 am
Little long, but very informatory article, thx for it
May 29th, 2009 at 8:42 am
i fink someone didnt have enought coffee this morning
May 29th, 2009 at 8:38 pm
i´m new in this kind of thing and belive me i lerning a lot of things and when i whant to learn more i just look in the internet and the internet give me the aswer .. good job thks for the help.
May 31st, 2009 at 1:27 pm
To be very true, this is the first of its kind which I am able to read so far fully. There are thousand posts out there who have all these terms but they are just another cause to make it more confusing and difficult. I like the way you explained all that and made it productive.
June 3rd, 2009 at 3:39 pm
Nice read Chris… the one point i think may not quite be accurate is this statement:
As SEO is not a one-off revenue generator (like ppc more or less) it’s not quite that easy.
June 3rd, 2009 at 5:42 pm
Nice post…its one big numbers game!
June 7th, 2009 at 7:37 am
It is another fantastic post. I so much looked at to read something about this topic and I found it finally. I would like to thank you for that you stopped my searching and for sharing your thoughts with us. I will back to read something new written by you.
June 10th, 2009 at 1:30 pm
You’re a flippin’ genius. I know a few CEO’s who could stand to be slapped by this kind of logic.
No matter how much traffic you get…it’s still all about the revenue at the end of the day.
eloquent in it’s brevity! Nice post!
June 15th, 2009 at 9:33 pm
Thanks for the articles, it is easy to learn. This article is very helpful. Espescially for me, because i am starting SEO.
June 22nd, 2009 at 2:05 pm
Math is everything and keeping your progress in a chart to measure your progress is key. You need to know what works and what doesn’t. I use this method as it really is common sense. If something is working well, I use it again.
June 26th, 2009 at 9:26 am
Reall good intro, however it will better if you can explain more measure units. It seem hard to know clearly.
June 26th, 2009 at 11:55 am
Excellent advice, it really is all about math and figuring out which metrics/actions drive which other metrics/actions. The AOL data was new to me, so thanks for that.
July 1st, 2009 at 12:35 pm
SEO and online marketing is changing at such a rapid pace it’s almost hard to keep up. SEO as it used to be known will no longer matter. So long as your content is relevant and code is optimized, searches will become more and more natural. Exciting times!
July 2nd, 2009 at 4:23 am
Excelent tips..great article probably the best i’ve read lately.
July 2nd, 2009 at 6:50 am
I just know started to learn more about SEO, yes the adwords is a easy way to promote the online business but i interested to learn about organic search. Hopefully i will success in future.
July 3rd, 2009 at 9:40 pm
An interesting post with some helpful and thanks for that.I am just learning about SEO myself so it has helped me to understand some of the background issues concerned with it.
July 3rd, 2009 at 11:15 pm
Thank you for posting this - this is something I wish more SEOs would realize. Too many think that sheer traffic is the money, but as you pointed out - it’s often not the case. Now if only I can make all my clients realize this…
July 6th, 2009 at 12:20 am
I hate Math. Very very badly…
July 9th, 2009 at 2:52 am
yes math is very confusing
but its nice when its in easy part
July 9th, 2009 at 3:40 am
It’s a numbers game, for sure. And math is not most people’s strong point. More of those multipliers = more links, more traffic, and more money (if you are monetizing anyway). Interesting read, thanks for the post.
July 10th, 2009 at 6:30 am
To get a good handle on SEO effectiveness, it’s important to match the purpose for the effort with specific metrics…. Set keyword ranking goals for news content and estimate the cost to achieve the same goals with PPC advertising over time… Demonstrate the cost of organic search traffic vs PPC traffic…
July 13th, 2009 at 4:23 am
I am out to prove that I can get a page 1 listing without spending ANY money. I get up early and take about 3 hours a day self promoting before I get ready for work. I have learned a lot about SEO, and am learning more every day. So far I have moved to the 1st page for 3 of my keywords, and got my google PR rank. Now all I have to do is continue what I am doing to increase my ranking. Oh by the way: business is starting to come in now.
July 13th, 2009 at 7:14 am
Chris,
Glad to see there are others who are using that leaked AOL data to get a better understanding on how search position affects click thru rate.
I’m amazed at how many people always assume they’ll get 100% of the traffic from the estimate figures…when they will be lucky to get 3-5% at best.
Good read.
July 14th, 2009 at 2:20 am
Thanks for this valuable post. Google keyword selection and google trand both tools are really useful for SEO.
July 19th, 2009 at 9:14 pm
You can measure which ads and campaigns generate value and which don’t. The other benefits are almost as important, though. By gathering this kind of data over time, you can measure more than the effectiveness of individual assets—you can determine how well whole marketing campaigns are doing.
July 22nd, 2009 at 8:10 am
I can’t believe that I’ve read all this post. I don’t like long posts. But, This one is really informative and include some EXCELLENT tips. I realized that I was measuring my marketing success in a wrong way!
July 26th, 2009 at 2:12 am
Excellent tips on measuring online marketing success. Thanks for sharing.
July 30th, 2009 at 2:52 am
Hi..I didn’t really know about that but Google Analytics is pretty good. It tells you so much about your traffic, where it comes from, where it goes,…it even showed me that putting an exclamation point in my title was decreasing traffic. Maybe you should try that.
August 1st, 2009 at 9:05 am
It’s a numbers game alright… and one that many people fail at. Now if only math class was more interesting at school. I’d have enjoyed working out clicks verses views multiplied by affiliate commision… instad of algebra and long division… yawn.
August 8th, 2009 at 6:14 pm
Hi, Nice Post. you raise some really great points. Thanks for sharing.