How can you accurately forecast the ROI of a link building campaign and justify the expense? This is a heavily debated question among the SEO community as there is a host of assumptions to make and variables to consider. However, here is a common sense approach that an e-commerce retailer can implement to evaluate and forecast the direct ROI of a link building campaign.
1) Keyword Research
The first step is to determine which keyword(s) in which you will target for a link building campaign. This step depends heavily on your business objectives; if generating new visitors is the goal then targeting broad, high volume keywords is probably your best strategy. However if increasing conversions is the goal, it would be efficient to target longer-tail keywords. Head on over to Google’s Keyword Tool (or your favorite keyword research tool) to assess and prioritize the keywords you have identified. If you decide to use Google’s Keyword Tool, it is always best to filter by “exact match” when evaluating keywords for SEO, that way you can see related traffic figures specifically for your term. Once you feel you have the right keywords, it is time to check out the competition.
Analyze the competition to determine how difficult it could be to achieve a top three-search engine results position (SERP) for the given keyword. Conduct back link analysis of the top ten ranking pages for your given keywords (there are plenty of articles out there that describe in detail how to complete this task). Pay attention to both the quality and quantity of your competitor’s links and record your findings. This will give you a gauge of how difficult it will be to rank for the targeted keywords. The goal is to determine the approximate quantity of links required to obtain the top organic position. It is also beneficial to analyze your competitors’ on-page SEO strategies to understand how they are using the selected keyword within the context of the page. Once you are satisfied with your selection, it is time to put those keywords to the test.
2) Test (Optional, but recommended)
Although the Google Keyword Tool will give you a decent idea as to the potential, relative monthly traffic, you can expect from a keyword, it is not by any means the most accurate. In order to obtain a better representation to the actual monthly impressions your targeted keyword can achieve, it is best to run a small pay-per-click (PPC) campaign. The goal of this initial campaign is not to assess the profitability of the keyword but rather, the popularity. So create an exact match campaign in whichever search engine you are focusing on. You can target a lower position as long as it remains on the first page; remember impressions is all we are interested in at this point. Run the campaign for anywhere between three to fourteen days, depending on your interest in testing. Do not forget to include a max daily spend amount for your PPC campaign. You will then be able to use this data to forecast out the monthly impressions that this keyword is capable of generating. At which point in time you may determine that reverting to step one is required given the low search volume. However, if you are satisfied with the results from the PPC test then it is time to move forward into forecasting.
A couple assumptions will be necessary to forecast your gains and essentially determine the campaign’s link building ROI. The first assumption is click through rates. You will need to determine what percentages of a keyword’s overall monthly impressions are distributed to natural search and to paid search. This always depends on the type of keywords you are targeting (top-down versus long tail) and your particular industry. If possible, evaluate a keyword that your website has a number one ranking for both paid and natural search.
Look at how many clicks your link is receiving for natural and paid search and compare that to the overall impressions a given keyword is receiving (according to your PPC program). This would give you a solid click through rate to use in your forecast. If you cannot conduct such an evaluation, then using the 2006 search data from AOL is also an option. Leaked data revealed that the first link on a SERP received 3.5x more clicks (42% of the total clicks) than the second listed link (11% of the total clicks) and 4.9x than the third listed link (8% of the total clicks). The click through rates drastically fell off moving down page one. These findings reiterate the high value of being ranked a top the SERP.
The second assumption required is the conversion rate and average order value. For this assumption, I recommend looking at how a similar keyword (based on its type, top-down or long tail) has historically performed on your website. If however you have targeted a very broad keyword, string with the purpose of acquiring generic traffic then consider using your website’s overall natural search channel conversion rate and average order value as the assumption.
The last steps of the puzzle are to forecast the potential gains, set the campaign cost and determine its ROI. We use the following equation for determining a Link Building ROI = (Forecasted Gains – Cost of Investment) / Cost of Investment. Here is an example with a known cost of investment. You can also use this equation to evaluate a budget if you have a targeted ROI and understand the forecasted gains.
Google: 3,100 (forecasted per keyword exact match impressions per month, from PPC program) * 40% (1st place ranking, natural search click through rate) * 2.48% (average natural search conversion rate) * $136.48 (natural search average order value) = $4,197.03 (Total Forecasted Monthly Gains) OR $4,197.03 * 12 months = $50,364.39 (Total Forecasted Yearly Gains)
Cost of Investment: example consists of a guest blog
$450 (Freelance content development, 20 pages of on-site and off-site content) + $400 (Press Releases, 2 x $200 each) + $2,000 (Targeted ad spots) + $600 (cash value of prizes & shipping) + $800 (Human Capital, 40 hours @ $20 / hour) + $150 (PPC Test) = $4,400 (Total Cost of Investment)
3-Month Link Building ROI:
($12,591.09 – $4,400) / $4,400 = 1.861
This example shows that with the proper testing and assumptions, it is possibly to determine the immediate ROI of a link building campaign. Now, analyzing the long-term potential for link building (the increases in supplemental long-tail keyword exposure and consequently traffic volume, overall domain strengthening and brand awareness) is an entirely different process, which proves to be more difficult to assess in terms of a nominal figure.
If you have any insight or know of a different process for determining link building ROI, please share them below!