In Search Metrics, ROI Is Often MIA

It’s been a busy and studious month for the researchers at iProspect. The Watertown MA-based search marketing firm has turned out, in conjunction with JupiterResearch, two related surveys on the way search marketers handle their metrics, specifically in calculating the return on investment (ROI), and more specifically the ROI on search engine optimization.

The conclusion of the first study: Many don’t bother with ROI. And of the second study: They should, because the majority of those who do watch ROI have concluded that the return for search engine optimization (SEO) often beats that for paid search advertising.

Both studies polled 636 qualified search marketers who outsource their SEM efforts, along with 224 qualified search marketing agencies. Among companies that outsource their SEO and manage their own pay-per-click advertising, 35% of those respondents who measured both outcomes said they get a higher ROI from optimizing for natural search results. Among companies that outsource both their SEO and their paid-search campaigns and tracked the returns, an even higher percentage—42%– reported that SEO produced the better ROI.

By contrast, 11% who tracked those returns reported a higher ROI on pay-per-click search ads than on optimization. Another 9% of respondents said SEO and paid search ads brought in similar returns on investment.

“This really stuck out among the results,” says Rob Murray, iProspect president. “Everyone’s talking about paid search, but three times as many marketers are reporting a higher return on natural search optimization. We expected the reverse, given the way people talk about and want to allocate budget toward paid search.”

But previous iProspect research published in April that found that search engine users find organic search results more relevant to their queries. As a result, 60% to 70% of all clicks on the major search engines occur on natural search results.

Murray said the truly surprising finding from this survey was the 14% who said they are unable to distinguish between the return they get from SEO and that coming from search ads. Another 10% said they were unable to calculate ROI for their optimization campaigns. And 21% responded that, for one reason or another, they have not measured the ROI for their natural SEO efforts.

The reasons why 45% of those iProspect polled—nearly half of all respondents– could not compare ROI for their SEO and paid-search campaigns broke out into technical and business-model reasons. Technical reasons included the lack of web analytics software and the unwillingness of some marketers or agencies to place cookies that would track visitors from first entry to a Web site to eventual purchase. In business-model cases, Web sites operated by some respondents had goals other than generating revenue (for example, disease information sites from pharmaceutical companies), while others were designed to encourage visitors to complete their transactions offline and had no way to link that conversion to the Web site visit.

“We have a systemic problem in that many people are not able to measure the ROI for SEO versus paid search channel to channel,” Murray says. “PPC is intuitive to people and somewhat easy to do: ‘I give you some money, you bring me some clicks, and those clicks ought to convert.’ Organic search optimization is less exact and involves more hard work and concentration. But if you do it right and track and measure the results, SEO is going to give you a better return.”

SEO has a cost-model advantage when its ROI is compared to that for pay-per-click ads, Murray says. With outsourced SEO, marketers usually pay a flat fee, so the bulk of the capital expense occurs up front; once a Web site has been properly optimized, there’s no additional expenditure needed to capture more visitors and pick up more revenue. But with paid search, growing traffic incrementally means growing the PPC costs incrementally too.

Why do so many search marketers fail to compare ROI from their optimization and paid search efforts, and therefore to discover the same advantages to SEO that 35% of their colleagues have? The reason is suggested in another poll iProspect did of the same marketer/ agency population earlier this month.

That study found that only four in 10 search marketing executives say their job performance is evaluated on the basis of business goals such as search marketing ROI, total sales generated, return on advertising spending or customer acquisition costs. On the other hand, 51% say their companies take account of Web traffic volume in gauging their performance, while 49% say search engine ranking they manage to get are a factor. Forty percent say they are judged at least partly on the number of clicks they manage to generate.

The difference, says Murray is that ROI, total sales, return on ad spend and acquisition costs are all terminal business metrics linked to some financial or budget component. The second group consists of more intermediate campaign-specific results; they are all “means to an end” for achieving actual business results with a revenue link.

So it’s likely that search marketers aren’t tracking ROI the way they should—or any other business metric—because their employers or clients aren’t insisting on such tracking. One indication to support this theory is contained in another finding by the iProspect survey: 68% of respondents whose annual online media budgets top $1 million say their performance evaluations are tied to the search ROI they achieve, compared to 38% of those with budgets under $1 million.

That begs the question why the companies that employ these executives and hire these SEM agencies don’t insist on a closer linkage to dollar-derived business metrics such as ROI. The answer, as Murray sees it, lies partly in a corporate myopia that opts for short-term results rather than larger gains over time.

“PPC is one-to-one and its results are fairly immediate or at least visible within two weeks,” he says. “With SEO, there’s a big lag time between the actual practical steps you take to optimize your site, getting it indexed by the search engines, and then seeing the returns from improved organic rankings. And in the current environment marketers are measured by today’s results, not tomorrow’s. They’re under tremendous pressure to deliver results quickly.”

Besides impatience in the executive suite for short-term search results, one other factor may play a part in turning search marketers from ROI to less meaningful metrics such as clicks and visits. The iProspect survey found that only a small minority of marketers reported getting credit in their evaluations for offline sales. Only 23% said their performance ratings include leads generated by search for products sold offline; 10% said their evaluations took in call center volumes due to search marketing, and 7% said their employers considered increases in traffic to brick-and-mortar stores.

The problem of properly evaluating the effectiveness of search marketing, either SEO or PPC, will become more crucial as keyword prices in popular categories continue to rise, Murray says. The entry of traditional branding advertisers into search marketing will exert pressure to make it more “accountable” as a medium.

“If you’re a brand marketer getting into search, how do you validate a PPC spend if you don’t sell your product online?” he says. “You built your Web site for a reason. So you have a responsibility to assign a numerical value to any and all conversion activities on that Web site. If there’s a defined action you want a visitor to take, and if it plays a role in your purchase cycle, then you better assign a business metric to it and manage for that.”

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