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How to Forecast the Future Value of SEO in 7 Steps

Jim Yu
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dollarsOne of the biggest challenges for any business, not just in the SEO sector, is being able to accurately forecast and measure the size of their market opportunity.

For decades successful businesses have been built, grown, and acquired, partly based on their ability to measure opportunity and work toward attainable forecasts.

Now, not every forecast is 100 percent accurate and that is certainly not the subject of my post today. Developing a discipline of forecasting and using that information to focus on the most attractive value opportunities in the competitive field of SEO puts you, as an agency, independent specialist, or brand ahead of your business competition.

My last post offered some ideas on how to measure ‘Share of Voice’ in order to get ahead of the competition. Now let's go one step further, talking about search opportunity forecasting and explaining why estimating the future value of SEO matters.

We are in an industry that is 15 years old and growing rapidly. SEO is a $2.2 billion industry, according to the Forrester US Interactive Marketing Forecast 2011 to 2016. Hence, if you want people to think of SEO as the critical business function that it is, then it's only logical to treat it like one.

The Business of SEO

The most dynamic SEO marketers want to understand the business value of SEO projects to assess the ultimate impact of SEO on their business. Quantifying the value of SEO allows them to make a business case to executives for investments while allowing them to focus on opportunities that promise the maximum results such as revenue and cost savings.

For those who feel that forecasting is unnecessary and can't be done then consider this: think like a business person for a second and not a tactical or technical SEO. The SEO industry is maturing and is quickly becoming a top priority of many a CMO agenda. If you truly want to get buy in from a CEO, CMO, CTO, brand managers and budget holders, being able to place a value on SEO opportunity and forecast accordingly is essential.

It’s simple business logic and forecasting is a very important piece of business logic.

Earlier this year we analyzed terabytes of page rank, social signals, keyword, backlinks, ranking and CPC data. We found that, even by looking at a small sample of just the retail, financial services, and technology verticals, brands are leaving upwards of $112 million in unrealized sales on the table.

Again, this is just a small sample of opportunity across three sectors and extrapolating this analysis to include entire sectors would definitely surface billions of dollars of lost opportunity. These opportunities could be secured by more aggressive or effective search optimization activities. We found that on average, the retail companies studied could drive more than $51 million in potential revenue, followed by financial services at $51 million. hardware and software solutions are were coming closer to the mark with leaving more than $5.4 million in potential annual revenue.

Forecasting Value in 7 Steps

A lot of people believe that due to the lack of control on organic searches and rankings on search engines, SEO forecasting isn't easy and not an exact science. And while I would agree that forecasting in SEO is new and still a little bit of an art, I’d like to share with you a step-by-step process.

There is no reason SEOs should not follow the fundamentals of any forecasting exercise which I describe below:

  • Create the forecasting model:
    • Know what problem you want to solve.
    • Know what to forecast and how this will determine your actions and decisions.
    • Know what determines the business result you want to forecast.
    • Quantify how these variables will affect the business result.
  • Build the opportunity model:
    • Allow for multiple scenarios.
    • Define and place value on opportunities.
    • Run the forecast for multiple scenarios.
  • Take Action

While the rest of this article is dedicated to walking you through these steps, I want to highlight one significant element of this approach. Most scenario planning in SEO assumes an X% increase or Y position increase across ALL keywords and does not analyze each keyword. The steps above are truly transformative because they equip marketers with insight on potential returns FOR each keyword.

Step 1: Know What Problem you Want to Solve

Through my career, I have seen several instances of forecasting done without a business problem in mind. As I discussed above, forecasting is usually done to address questions such as:

  • Where should I invest in SEO?
  • Which keywords should I focus on?
  • Should I target rank improvement for brand keywords?
  • Will prioritizing non-brand keywords deliver greater returns?
  • Which product category should my SEO strategy focus on?

Step 2: Know What to Forecast And How This Will Determine Your Actions and Decisions

Next, decidie the metrics that you want to forecast. Given the importance of forecasting to the CMO’s office and the role of forecasting in resource allocation, I strongly suggest using metrics that talk to business results. More importantly, they should answer the business problems outlined in Step 1. It's very important for you to know what you will do with the forecast.

Some of our customers see value in forecasting in savings from paid search when organic rank improvement leads to reduce paid spend. Others forecast conversion value or revenue earned.

Also, remember that it is not just about choosing the metric, such as conversion value, that is important. It is very important to define the business situation. In other words, forecasted conversion value only makes sense in the context of improving rank for a group of keywords.

Step 3: Know What Determines the Business Result You Want to Forecast

Identifying the variables that determine the business result you want to forecast is not easy. You will need to build a list of metrics and A/B test to see if these variables influence business results. This can be a time-consuming task but do not let that discourage you – this exercise can also be one of the most rewarding too.

Below are just a few variables that can be taken into consideration when forecasting the conversion value of rank improvement for a keyword group:

  • Current rank and conversion value
  • Targeted rank and conversion value
  • Difficulty of rank and conversion value improvement
  • CPC data
  • PageRank data
  • Search volume
  • Keyword data – brand and non-brand
  • Average value per conversion
  • Social signals

variables-when-forecasting-conversion-value-of-rank-improvement

This is just an example - it is for you to study what variables affect your targeted business results.

Step 4: Quantify How These Variables Will Affect the Business Result

Once you have brought all your specific variables together you can begin to quantify how these variables affected the business result you want to forecast. It is not easy but the results of the A/B testing you did in Step 2 should be of immense help.

This measurable relationship between your variables and business results is your forecasting model from a mathematical point of view. The next four steps deal with applying this model to real scenarios and opportunities.

I would like to highlight one strong recommendation for your model – ensure that the model helps you project returns when the targeted rank improvement for each keyword within a group is not the same.

If you are able to do that, you are making a huge leap for SEO forecasting within your company. This is because most homegrown forecasting models allow you to project results when targeted rank improvement for all keywords within a group is the same, which is a very unrealistic scenario. In addition – if your model allows you to target different rank improvement for each keyword within a group – your forecasting will be more accurate and flexible.

Step 5: Allow for Multiple Scenarios

The SEO sector, like life itself, contains various degrees of uncertainty. However, the very reason we build forecasting models is that there is an element of uncertainty in the expected results.

If we knew for a fact what the results would turn out to be, we would simply choose the course of action which lead to these results. There would be no challenge in resource allocation and it would be perfectly easy to make a business case for everything we do. Therefore, it makes sense to factor in this uncertainty by building forecasts that target more than one scenario.

This is best illustrated with an example. Let’s say I want to forecast the revenue projected when I improve rank for my brand keywords. I could choose multiple scenarios for targeted rank which look something like this:

  • Aggressive scenario: Target rank for all chosen keywords is 1.
  • Moderate scenario: Target all keywords to rank better than my competitors who have a lower page authority score than me. You may also want to consider those competitors who have worse-off on-page and off-page factors.
  • Conservative scenario: Target low difficulty keywords to rank better than my competitors who have a lower page authority than me.

At the cost of being repetitive, remember that every forecasting model has to make room for uncertainty and risk. This can be done by creating variations of the model described in Step 4. Without getting into the science of forecasting, one way of creating a separate model for each scenario is by varying the parameters you used in building the model.

current-seo-value-optimized-best-case

Step 6: Define Opportunities

Now that we are all set with the model, its time to flex our forecasting muscle and actually use this model. The first step is to define opportunities (business situations) that we want to apply the forecast to.

Our creative customer community has applied forecasting to several situations. These are the most common ones:

  • Assessing Total Addressable Market: Companies targeting a large number of keywords are in a position to assess their Total Addressable Market for the different sectors they play in. For example, a large e-retailer offering a wide portfolio of clothing and footwear can forecast the conversion value of rank improvement for keyword portfolios for each line of business. We have seen customers use this type of macro forecasts to get a high-level view of potential pay offs from different verticals and product categories. This also sets the foundation for drilling down into select verticals to identify lucrative opportunities.
  • Targeting specific keyword opportunities: In contrast to the high-level forecasts described above, SEO managers benefit from forecasting the payoff from targeted keywords opportunities. Let’s say you are the SEO manager for a soccer merchandize store and want to target the buzz around the Euro 2012 Final between Spain and Italy. You could create two keywords opportunities, one each with low hanging keywords related to Spain and Italy soccer gear. In other words, each opportunity is a set of related keywords that you will aim to improve the rank for.

Step 7: Run the Forecast for Multiple Scenarios

Continuing with the last example, we now have two keyword opportunities consisting of rank improvement for two sets of keywords related to the Spanish and Italian soccer teams. As discussed in Step 5, when you set rank improvement goals for these keywords, be sure to account for uncertainty by choosing multiple scenarios.

For example, you may want to model conservative and moderate scenarios for both opportunities since large sports merchandize retailers on Page 1 outrank you and you want to get realistic forecasts.

For each of these scenarios, run the forecasts. Your forecasts could return projected conversion value of improving rank for the two keyword opportunities. Again, you will have two sets of forecasts for each opportunity, conservative and moderate.

revenue-opportunity

Take Action

The next step is the most critical step of your forecasting process – taking action based on these forecasts. In the forecasts above, clearly targeting keywords related to the Spain gear seems more lucrative if you looked at the moderate scenario. But, as with most things in life, the analysis could be a lot more complicated as shown below:

  • Let's say targeting the Moderate Spain scenario would need heavy investment in content development and social media outreach. If you have the resources to invest in these two areas, then you can take the next step of assessing the value of these investments. You would then have an approximate ROI for this strategy.
  • On the other hand, the goal of conservative rank improvement for Italy gears seems easily attainable due to the depth and breadth of the content supporting these products. Also, you may have a solid backlink profile for these products. With little effort, you can target a modest improvement in the rank. Maybe this is a more practical scenario depending upon how your workload looks.

The list of considerations could go on and on. What matters is that you now have, at your finger tips the potential payoffs from targeting different product categories and aiming for goals at different levels of ambition. You are now well-equipped to decide what goal you want to pursue, where to put your resources, prioritize competing projects and make a business case for further investments.

perform-seo-forecast

Conclusion

Forecasting opportunity is an essential part of the SEO business planning model. While we face a multiplex of challenges and opportunity brought by Panda, Penguin and the reduction in keyword data (SSL) provided by Google the fact remains that putting a value on opportunity and managing your search campaigns accordingly is vital.

What’s more, the growing importance of social media and social signals also present new and exciting ways to dig deeper and look at how these channels affect SEO intellect and forecasts.

As media converges so do budgets. The bottom line is that this just brings with it more opportunity. How you identify, measure, attribute value, and act on those opportunities is always going to be our biggest challenge.


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