What should your SEO budget be?
Is this proposed SEO work too much or too little?
The question baffles even the best marketing managers.
Title tag rewriting.
How does a marketing team even evaluate these SEO tasks and put ROI to them, let alone arrive at an SEO budget that makes sense.
TLDR; How Much Should You Spend on SEO?
There’s no clear answer for this, as every site, company, and industry is different. The short answer is to keep spending until the ROI doesn’t make sense. If you’ve worked out your customer lifetime value (CLV) and also your cost per customer acquisition from SEO, then you’ll have a very clear picture of your ROI. If you’re not at this level of detail, you should aim to get here in the future.
If you haven’t worked out the above, then it becomes a bit harder to determine, but still possible. As a company, you should have a set overall marketing budget, often 5-10% or more of revenue, depending on the industry. You should have a certain percentage dedicated to your digital marketing overall, and then break that down even further to a certain percentage dedicated to organic traffic (SEO).
Let’s say you’ve dedicated 10% of your company’s revenue to marketing. Then let’s say you do some traditional offline marketing that consumes half of that budget. You now have 5% of your revenue dedicated to digital. Then you should take a look at other successful brands in your industry that you’re trying to emulate. Using SimilarWeb you can get a rough estimate of where they get their website traffic from. Let’s also say that your competitors are getting 50% of their website traffic from organic search. It would then make sense to assume that you should dedicate half of your digital budget to organic search, or 2.5% of your overall company’s revenue.
These numbers will vary for every company, but this is one example of how to arrive at a reasonable number.
Here’s a hypothetical range of companies and how much they should spend on SEO:
|Company Type||Revenue/Yr||Marketing %||Marketing $||SEO % of Mktg||SEO $|
|Established Ecommerce Giant||$1b||10%||$100m||15%||$15m|
|VC Funded High-Growth Fintech||$50m||20%||$10m||30%||$3m|
|Top Shopify Ecommerce Site||$30m||25%||$7.5m||20%||$1.5m|
|Large Local Services Provider||$5m||10%||$500k||40%||$200k|
Let’s dive a bit deeper five strategies to arrive at a logical SEO budget, starting with the simplest, and finishing with the most sophisticated.
1) Base on Overall (Digital) Marketing Budget
It’s really hard to know what your overall marketing budget should be, let alone digital, let alone SEO. There are full blog posts, books and courses dedicated to that, but in summary, these are common approaches to finding a marketing budget:
- Flat rate dollar approach – based on what you can afford (least difficult, least accurate)
- Percentage of sales – popular method, usually 9-12% of annual budget (less difficult, more accurate)
- Match competitor – base budget on what competitors are spending to keep up (less accurate, more difficult)
- Marketing plan objective – budget aligns with objectives, though most logical by most (more difficult, more accurate)
So however you arrive at your marketing budget overall, you’ll allocate a portion to traditional marketing (offline) and a portion to digital.
Breaking down digital further you may allocate by overhead costs such as marketing team salaries, tools, and the marketing website. Then it makes sense to divide up the dollars by which channels drive the most traffic and revenue to your site, either what the present breakdown is, or what the ideal should be based on your industry standards.
For instance, if email is driving 50% of your traffic to your site, but organic is just 10%, that’s likely an imbalance compared to most industry averages, where organic is 50% of traffic and email is closer to 20%. Based on this, you would allocate more money to SEO to get it to the industry average.
Conversely, if you are happy with your current traffic channel distributions, let’s say it’s:
- 40% organic search (SEO)
- 20% paid search (Google Ads)
- 10% social media (paid + organic)
- 10% email
- 10% display ads
- 10% referral traffic
Then you would allocate your budget according to this breakdown.
Every company and industry is different, so take the time to research and plan a strategy based on this.
2) Base on your Paid Search Spend
Paid search, also known as Pay-Per-Click (PPC) is the easiest comparison with SEO, especially Google AdWords, since the user will either click an AdWords ad or organic listing. Similar comparisons can be made against Facebook Ads, but here we’ll focus on Google AdWords (now Google Ads) PPC.
Let’s say you’re currently spending $10,000 a month on Google AdWords, and nothing on SEO. Well, with 80% of clicks in your average SERP, it wouldn’t be a far cry to say your SEO budget should be 4x your PPC budget.
But let’s get even more conservative. At a minimum, you should be spending at least 50% of what you’re spending on your PPC budget. A more “best practice” benchmark would be matching 100% of your PPC budget.
In my perspective (and most SEOs) it’s insanity to spend an overweighted amount on PPC with a disproportionately small SEO budget.
I was working with a client that was spending $14,000 a month on Google AdWords, with a very unoptimized campaign – literally sending Google free money – and was reluctant pay more than 15% of that on monthly SEO work. While in some industries this may make sense, it was not a sound strategy.
PPC is great and I love how measurable it is, but SEO is a more permanent long-term strategy, and should at least be matching what the PPC spend is.
Certain industries should be spending more or less on SEO vs PPC, here are some quick examples:
Where to spend more on SEO:
- In some mature industries, like insurance, mortgage, loans, and other financial categories, cost-per-click can be as high as $60-$100 per click – in these industries it makes a lot of sense to spend more on SEO
When to spend more on PPC:
- If you’re a funded startup trying to find product market fit, and you have a boatload of cash, it makes sense to test the market with more PPC dollars than SEO, as you may be pivoting product and industries in few months, so you’re not yet ready for long term investment
All too often, we as SEOs do a poor job communicating the ROI of SEO compared to PPC. We talk more about traffic when we should talk more about revenue and conversions.
3) Base on Real Competitors’ Organic Search Value
Let’s say you’re the 20th most popular direct-to-consumer (DTC) mattress company in the market. You’ve got a long way to go to the top, and don’t have the war chest that Casper or Leesa have.
Knowing the value of a competitor’s organic traffic – let’s say $100k a month – you can compare it against your own – $50k a month for example, and decide how much you want to invest to catch up with your competitor, and how long you want to wait before you get there.
One simple way to estimate organic search value is to use competitive research tools like Ahrefs, SEMrush or SearchMetrics to estimate the organic value of competitor’s websites.
What the organic traffic value is derived from:
- Estimated organic traffic keyword by keyword, based on keyword rankings and volume of each keyword.
- The cost-per-click (CPC) of each of those keywords.
- Multiply those together and you have a $ value – this says if you were to buy all of this organic traffic via Google AdWords, how much would it cost per month?
- Probably the most accurate way we have so far, but just a dollar value on competitors’ websites, without knowing their internal conversion rates and numbers.
Going further, you can get tactical on a page level.
This very strategic tactic – Moneyball SEO – entails picking off pages that your competitors have that are high in organic value and low in difficulty. Difficulty is measured by both the keyword difficulty (KD) of the keywords that page is ranking for and also the page authority (PA – a Moz metric) or URL rating (UR – an Ahrefs metric).
This approach is very intelligent and works wonders. Probably the most under-appreciated SEO strategy. (Perhaps those that use it don’t talk about it.)
4) Laser Focus on your most Important Revenue Driving Pages
Let’s be honest – it’s hard to get backlinks to revenue-generating pages, such as ecommerce product pages or lead generation pages, which is why one of the most common SEO strategies is to do content marketing and lift the site as a whole.
But if you as the marketing manager know your most important revenue driving pages, and can present these as the ultimate goal to raise organic traffic for, you’re much more advanced than most.
Let’s say you have to sell your own watch brand online and you have 5 top-selling product pages that do well in paid search and paid ads but have limited organic traffic. What you would plan your SEO budget around is what the outcome would be to drive significant organic traffic to these 5 pages.
The SEO strategy would be to build around these 5 pages and everything would be measured against the 12-month success of these pages.
The SEO plan would involve creating content and getting links around and directly to these 5 pages – so both direct and indirect SEO – but with everything laser focused on these pages, the plan is very focused and very measurable.
Planning a budget and strategy around “doing SEO for my whole site” means attention and resources being spread through among dozens or hundreds of pages, which means success is difficult to measure except by the very long term.
5) Base on Customer Lifetime Value (CLTV) and/or Customer Acquisition Cost (CAC)
The holy grail of marketing is CLTV and CAC, yet why do so few marketers have these tattooed on their brains?
It’s difficult to get to that point, but magical when you do.
If every customer that fills out your lead gen form for auto insurance is worth $4,500 while a customer (CLTV = $4,500) and out of every 100 visitors to a page, 1 ends up becoming a paying customer, then each visit is worth $45.
See how much clarity that brings to things?
If the page has 10,000 visitors a month currently, then the page is worth $450,000 a month. If an SEO strategy can bring an additional 10% organic traffic to the page, that’s a bump of 1,000 visitors, and +$45,000 a month in organic traffic value.
Let’s say an SEO campaign to bring in that 10% increase has a lasting effect of 2 years (before the competition catches up again). To break even on your SEO spend, you could pay $1,080,000 for that campaign and break even on revenue. With a profit margin of 30% for each additional customer (common in insurance), you could pay $324,000 for that SEO campaign and break even on profit.
If an SEO company puts together a campaign budget of 20% of that, or roughly $64,000 – you should immediately say yes.
And this is just for one page.
Granted, this is an ideal scenario in an industry with very high CLTV and healthy profit margins, but there are industries with even higher CLTVs and profit, such as mature or high growth SaaS companies.
Knowing your CLTV can help you appropriately understand if a proposed organic search budget is reasonable, or way off.
This is the most sophisticated approach. If you can bring these numbers to your SEO consultancy, you’ll have a much better strategy and partnership.
Conclusion – Do Not Ignore SEO Budget Allocation
After spending years looking that the space and watching sites rise and fall, including those I stopped working with, I implore you to not ignore your SEO budget allocation. It’s too easy for marketing managers to be confused by SEO and just choose to ignore it. But how does it make sense when 30-70% of your traffic is coming from organic SEO traffic, that you spend 10x the SEO allocation dollars on paid search? It’s too easy to ignore but you really, really need an SEO professional, agency, or in-house team to watch out for your allocation and practices.
It’s tough to build the optimal marketing budget, tough to build a great digital budget, and challenging to nail down the most appropriate SEO budget for both cash flow and growth.
Too often, both the client and SEO will pick a number that doesn’t have a lot of risks, but this may be seriously hindering growth.