First, a basic forecast takes a couple different variables:

• Average Search Volume for a term (Given by both Google and MSN on exact queries from the last 12 months).
• Ave CTR per position (there are several studies out there)
• Ave Conversion of Website
• Ave Order Size or Lifetime Value of a Client/Lead

The VERY basic formula looks like:

1. Average Search Volume * CTR for Position = Possible Traffic to your site
2. Possible Traffic to your Site * Ave Conversion for Site = Possible Transactions
3. Possible Transactions * Ave Order Size = Revenue
4. (Revenue*months at position)/Cost of Service = ROI of SEO

Wow, that was hard.  I know that isn’t the most scientific method given it leaves out a ton of variables, but we are just getting started.   All of the following factors will end up affecting one, if not all, of those key variables.  By focusing on the Hurtles, you can find ways to account for them within your own forecast.

The Hurtles of SEO Forecasting:

There are a lot of variables to account for in a forecast, but that doesn’t mean we can’t account for them.  Bruce points this out with the statement:

No, there are no guarantees, at least not until I have stock control of Google, and perhaps not even then. Simply put, a guarantee requires enough control to have some chance of success, and nobody has enough control over the search engines or their own competitors to make that statement without it being fraud. I have no control over your developers who may or may not implement my recommendations. And I have no control over a ranking algorithm that search engines have admitted to altering more than 450 times per year. If you are offered a guarantee, it is simply a manipulation tactic — when the company offering a guarantee fails they assume you will not sue them, and their sneaky wording precludes it anyhow (similar to an acts of God clause). When dealing with a moving target, the only guarantee we can make is that our effort will be our best.

Bruce laid out a great deal of hurtles that face us in forecasting.  Thank you for that, but now we get into the nuts and bolts and start making headway in SEO Forecasting.

No Guarantees:

unless you are working under a pay-for-performance contract, no forecast should come with a 100% guarantee.  Executives know this.  They understand that things change.  Despite their best efforts, even they can’t forecast quarterly numbers perfectly.  That being said, they have to have an idea what they will get out of what they spend.  That becomes even truer in this economy.

Client’s development Time:

No, you cannot determine what the development time will be for a client’s IT department.  That being said, you CAN ask.   A proper plan will take into account how much of the company’s resources you will/won’t have available.  If you know what you have to work with then you can prioritize and forecast for it.  If you aren’t talking to your client’s IT department, then you have bigger problems than forecasting ROI.  Clients need a reason to push a project through; you can give them a goal that is more than just a position.

Competition’s SEO/Marketing Efforts:

Client’s know better than anyone that they cannot stop the competition from pushing SEO and/or Marketing efforts through. The nature of competition states that nothing is going to stay the same.  A CFO/CMO wants a forecast?  You just opened up a conversation about what their competitors are doing both online and offline.  Marketing efforts, online and offline, drive SEO movements.  You can’t account for things you don’t know.   If you know what the competition is doing, then you should be able to factor it into the forecast.  If you don’t, leave it out with a statement that we don’t know what is happening in competition’s boardroom.

Un-Know Ever Changing Algorithm:

No, no one knows what the search algorithms are.  Yes, everyone knows what factors are taken into account (at least the most important ones).  The engines have stated time and time again that they are trying to favor white hat sites that deliver the best and most relevant content to a query.  You can’t control the algorithm, but you can be white hat…and not have to worry about it (assuming you’re a client that is looking for long term SEO gain).  It doesn’t matter what algorithmic change they make.  If you building content people want, in a way that is accessible by everyone, from a place that has a great reputation, and actively promotes, you will win on the SERP.  See, taking into account a algorithm that changes 450 times a year isn’t that hard.

Seasonality:

Playing the seasonality game is hard, but doable if you plan it out.  You can forecast it out if you take the time to understand what happens and why.  People don’t write about Christmas gifts in June, but you can plan and build the relationships needed to promote your site in June (and smart marketer will).  You can then take into account lifts and bumps into seasonality…if you take the time to understand what happens and why.

Reputation is NOT a reason to NOT Forecast:

This statement really gets me fired up…and probably the reason I wrote this post.  Being the “best” isn’t reason enough to be lazy and not attempt to give your clients a reason to take your recommendations.

Despite all the uncertainty, you’ve come to the right place. You are hiring the best company because the probability of success increases significantly…

My friend has a question she likes to ask, mainly in jest, when she hears an answer that wasn’t as thoughtful as she would like: “Do you think that answer is acceptable?”    If I was a CFO or CMO and someone told me that hiring them, the best, was just as good as any forecast I would have to object with, “Do you think that answer is acceptable?”  Reputation is not a reason to not attach a problem; it’s the reason why you should be the one to find a solution.  Peyton Manning doesn’t get paid what he does because he just happens to be the best.  He is paid more because he finds a way to do what others cannot.  The more people look up to you, the more you should be the one pushing the issue…not running away from it.

What Makes My Forecasting Methodology Different?

No, I’m not going to give away my secret sauce (if you want it, buy it from RM), but it comes down to true thought leadership in SEO Analytics and understanding of Business.  I make the statements upfront that I use these forecast directionally.  I state I cannot guarantee anything because I cannot control everything.  I also state that the efforts we push through are designed to give us a certain improvement in rankings and, more importantly, drive revenue.   I take into account the objectives of the forecast before I even begin the forecast:  Is this to show potential at a high level or give support to an individual project.

After that, my forecasts take into account:

• Competitiveness of the SERP
• Competitiveness from Paid Search (CTR differs if there are 1 paid add or 10 paid adds).
• Can take into account up to 5 digital assets
• What can we push through from a technical stand point and how important is it to the ranking algorithm (this becomes harder when you are working about the keywords within the H1 header, but works really well if you are converting all Flash sites to something more crawlable).
• And Current Position of keywords (going from position 5 to 4 can be doable but not so much from 80 to 3)
• And this is only version 2.0…I’m working on 3.0 as you read (a science I still see as being in its infancy).

When forecasting, show what you can and can’t account for up front.  State you don’t give a guarantee.  Given the philosophies of modern business, executives will take that over a reputation any day of the week.  If nothing else, you opened up the conversation to become a partner, not a vendor, in their business.  I might be reading too much into the issue, but it feel like strait SEO’s may not want to forecast SEO ROI because it takes away from the importance of rankings.   Great SEO’s, the ones that are paid the most, will find a way to make revenue the highest priority.  I preach SEO Analytics because I’m not a true SEO.  I work with SEO, SEM, and Web Analytics on a daily basis, and focus on gaining revenue over rankings.  Forecasting isn’t something that our industry should run away from; we should be attaching it at full speed.  It isn’t as hard as everyone thinks…just take the time to think it through.

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