Does the Cost of Not Ranking get your CFO’s Attention?

One of my biggest frustrations is senior management’s apparent lack of interest in Search Marketing, specifically SEO. For many companies, visits from search engines drive the vast majority of the traffic to their sites. While it is easy to say they don’t care, or they hae bigger issues, I believe in many cases, they just are not aware of this vital business driver. In my experience, top executives only become aware and, more importantly, involved when they lose this valuable source of visits and have to spend more via paid media to maintain the same traffic levels. While I find many CMOs and most CEOs don’t lose sleep over SEO and its impact on their business, it seems that some CFOs are starting to pay attention.

I am starting to see more and more companies add very specific disclaimers to their 10Q (Quarterly Report and 10K (Annual Report), examples below, about the potential, and in some cases actual, negative impact on sales and marketing expenses due to the loss in organic search traffic. I hope this increase in mentions in financial reports means that more and more CFOs are asking about SEO and helping to push for better monitoring and elevate its importance as a key driver for the business. Since CEOs must sign off on these reports, maybe they will understand the risk and ask for more awareness and controls in the industry.

I recently mentioned my frustrations with a lack of executive awareness of the business value of SEO to David Dalka, Founder and Managing Director of Fearless Revival, who is trying to educate a new generation of digitally-focused executives.  Davids told me that he especially hammers the business impact home to his CFO and Start-Up Advisory clients. He tells them to ask about their Search Marketing performance, specifically SEO, and what it contributes to traffic, leads, and sales.  David further suggested that all Search Marketing Managers should prepare answers to the inevitable question, “What are the enterprise risk issues of SEO?” or as I call it, “The Cost of Not Ranking,” and be able to explain What the potential risk to the business in terms of lost traffic and Paid Search Costs.

The Business Risk of Losing Organic Traffic

The impact of decreasing organic traffic made the rounds last month, with Overstock indicating that their sales and marketing expenses increased 30% due to an increase in spending to make up for a decrease in organic traffic, which was attributed to a change in Google’s scoring algorithm.

Overstock.com 10K

In Q2 2017 and continuing, we have experienced slowing of our overall revenue growth which we believe is due in part to changes that Google, Inc. (“Google”) has made in its natural search engine algorithms, to which we are responding. While we work to adapt to Google’s changes, we have increased our emphasis on other marketing channels, such as sponsored search, which has generated revenue growth but with higher associated marketing expenses than natural search. We expect this trend to continue in the near term while we work to adapt to these changes.

Shutterfly 10Q

Our business and financial performance could be adversely affected by changes in search engine algorithms and dynamics, or search engine disintermediation.

We rely on Internet search engines such as Google, Yahoo! and Bing, including through the purchase of keywords related to photo-based products, to generate traffic to our websites. We obtain a significant amount of traffic via search engines and, therefore, utilize techniques such as search engine optimization and search engine marketing to improve our placement in relevant search queries. Search engines, including Google, Yahoo! and Bing, frequently update and change the logic that determines the placement and display of results of a user’s search, such that the purchased or algorithmic placement of links to our websites can be negatively affected. Moreover, a search engine could, for competitive or other purposes, alter its search algorithms or results causing our websites to place lower in search query results. If a major search engine changes its algorithms in a manner that negatively affects our paid or unpaid search ranking, or if competitive dynamics impact the effectiveness of search engine optimization or search engine marketing in a negative manner, including but not limited to increased costs for desired search queries, our business and financial performance would be adversely affected, potentially to a material extent.

AutoParts Network 10Q

Like most e-commerce retailers, our success depends on our ability to attract online consumers to our websites and convert them into customers in a cost-effective manner. Historically, marketing through search engines provided the most efficient opportunity to reach millions of on-line auto part buyers. We are included in search results through paid search listings, where we purchase specific search terms that will result in the inclusion of our listing, and algorithmic searches that depend upon the searchable content on our websites. Algorithmic listings cannot be purchased and instead are determined and displayed solely by a set of formulas utilized by the search engine. We have had a history of success with our search engine marketing techniques, which gave our different websites preferred positions in search results. Search engines, like Google, revise their algorithms from time to time in an attempt to optimize their search results. During the last few years, Google has changed its search results ranking algorithm. In some cases our unique visitor count, and therefore our financial results, were negatively impacted by these changes. While we continue to address the ongoing changes to the Google methodology, during the second quarter of 2017, our unique visitor count decreased by 5.5 million, or 18.2%, to 24.7 million unique visitors compared to 30.2 million unique visitors in the second quarter of 2016 primarily due to a shift in traffic from our e-commerce sites to our online marketplaces. As in the past we expect Google will continue to make changes in their search engine algorithms to improve their user experience. As we are significantly dependent upon search engines for our website traffic, if we are unable to attract unique visitors, our business and results of operations will be harmed. We have redesigned our approach to attracting customers through search engines with increased paid advertising which has helped us offset some of the decline in organic traffic to our e-commerce sites.

Rosetta Stone 10Q

If one or more of the search engines or other online sources on which we rely for website traffic were to modify their general methodology for how they display our websites, resulting in fewer consumers clicking through to our websites, our sales could suffer. If any free search engine on which we rely begins charging fees for listing or placement, or if one or more of the search engines or other online sources on which we rely for purchased listings, modifies or terminates its relationship with us, our expenses could rise, we could lose customers and traffic to our websites could decrease.

True Car Inc. 10Q

We rely, in part,?on Internet search engines to drive traffic to our website, and if we fail to appear prominently in the search results, our traffic would decline and our business would be adversely affected.

We depend in part on Internet search engines such as Google, Bing, and Yahoo! to drive traffic to our website. For example, when a user types an automobile into an Internet search engine, we rely on a high organic search ranking of our webpages in these search results to refer the user to our website. However, our ability to maintain high, non-paid search result rankings is not within our control. Our competitors? Internet search engine optimization efforts may result in their websites receiving a higher search result page ranking than ours, or Internet search engines could revise their methodologies in a way that would adversely affect our search result rankings. If Internet search engines modify their search algorithms in ways that are detrimental to us, or if our competitors? efforts are more successful than ours, overall growth in our user base could slow or our user base could decline. Internet search engine providers could provide automobile dealer and pricing information directly in search results, align with our competitors or choose to develop competing services. Our website has experienced fluctuations in search result rankings in the past, and we anticipate similar fluctuations in the future. Any reduction in the number of users directed to our website through Internet search engines could harm our business and operating results.

Monitoring and Mitigating the Risk

I strongly suggest you start working on your answers to what is the business impact if you lose your current levels of organic traffic. As Google shifts more of the SERP real estate to paid listings companies will take a hit and need to start budgeting for the new reality. They also need to ensure that they are effectively monitoring for any declines to ensure they are not catastrophic. There are a number of actions you can take to at least monitor your level of risk. The more of your visits that are dependent on organic traffic the more you should have warning systems and backup plans. There are a few other tips I can offer as well.

Calculate the Cost of Not Ranking

The Cost of Not Ranking is simply a model I created a number of years ago that calculates the cost of using paid search to make up the difference of either lost organic traffic or to show the traffic you could/should get for free via organic search if you focused on optimizing the site. ?Understanding this cost and developing a strategic plan to reallocate funds to cover either a short-term drop and/or potentially long term. ? As many of these companies indicate it could change their costs and acquisition models completely.

Like most of my models, I first introduced this concept of “Cost of Not Ranking” in 2000 in a presentation to an F100 company to convince them to spend anything on SEO. At that time, they were spending around $500k a month across Yahoo, AltaVista, GoTo to own various words that related to their business. ?My agency was hired to do an SEO audit and recommend changes to make them rank better. ?We delivered a 100+ page report of recommended changes and were told that there were no resources to make the necessary changes. ?Ironically, there were $5.5 million dollars to pay for traffic that most of which we could get for free with some basic changes. The Cost of Not Ranking model created the shock and awe that changes the minds of a few senior executives to actually invest in their website. In the end, we drove 3x what paid was bring for a fraction of the cost.

 

If you are interested in this cost-of-not-ranking model, take a look at the article I wrote in 2010 explaining the different calculations and fields. In this example, a similar-sized company’s risk of losing the top rank for just 7 words could cost them $2.3 million in increased Paid Search Costs. We have obviously integrated this into DataPrizm as both an alert and an opportunity metric.

Monitor your Organic Performance

The good news is if you are not chasing algorithms and develop sound content practices you are typically ok. If you live and die by the slightest shifts then you need to have a backup plan. ?I am not suggesting hour by hour ranking reports. At a minimum, you should be monitoring Google and Bing Search Consoles for a week over week and month over month shifts. If anything changes radically you need to develop a triage of the problem. If you are not on the Search Team might make sense to

Implement an AlwaysOn Strategy

With an AlwaysOn Strategy you can monitor the performance of critical keywords and have a specific plan to increase your paid search spend should they drop in performance. By monitoring your mission-critical words you can ensure you always have top of page coverage in organic or paid search.