One of the most frequent explanations I’m given for clients being interested in SEO is that they want to get away from adwords. They view it as wasted spend that’s not developing their business but merely keeping it ticking over. The moment they turn it off, it’s like it never existed. Organic authority on the other hand builds and builds and builds, and even if one day they decide to put the campaign on hold, the value they have created will remain for months and even years to come. The future of their business, they say, must be exclusively organic.
I disagree.
No business is less stable than one that depends entirely on its organic rankings. Google’s algorithm will not work indefinitely in your favour, so any business that does rely on it has a very profitable ticking bomb on their hands. Ideally you would diversify your marketing through strengthening the brand (direct traffic, social, email list, offline marketing, etc) which would of course also strengthen your SEO, but the trouble with growing a brand is that it’s slow and unpredictable. Adwords on the other hand offers an instant stream of business entirely within your control.
It’s all about the numbers
If something is making you money, you should probably do more of it. If it’s losing you money, then unless it’s building an asset (which adwords is not) then you should probably stop immediately (or at least evolve the model until it becomes profitable). The challenge therefore is understanding the true profit of adwords. If your site is ecommerce then it’s pretty simple. For brochure sites it can a little more complicated. Here is the formula I would recommend:
- What’s your conversion rate when someone gets in touch as a result of adwords?
- What’s the average lifetime value (in profit, not revenue!) of this client?
- (And just to complicate matters) What is the referral rate per client? Does each new client actually equate to 1.5 new clients?
Let’s say that the conversion rate is 50%, the lifetime profit value is £1000 and referral rate is 20%, then this means that each new lead is worth £600. So as long as the lead is costing less than £600 (which adwords will tell you to the penny) then it’s a profitable and viable route to market, and the more profitable and viable routes to market a business has at its disposal, the more resilient and scalable it becomes.
So, if you don’t know these two figures – profit value per sale/lead and your adwords cost of generating that sale/lead – I would recommend calculating them as fast as you possibly can. You may not need this particular sales channel today, but you’ll sleep a lot easier knowing it’s ready and waiting should circumstances ever demand it.
Dan
