IN THIS ARTICLE:

    Most marketers realize the important role that SEO plays in delivering their offerings to prospective customers. This is why spending on search engine optimization is steadily increasing — reaching an estimated $79.3 billion in the United States in 2020. 

    But, even if you know how critical website optimization is to your marketing, figuring out how much to spend on SEO is another question. And while there’s no single, simple formula used across the board to set an SEO budget, I’m going to share some strategies that can be effectively leveraged to find a number that’s right for your business.

    Breaking Down Your Marketing Budget: Digital vs. Traditional

    Marketing budgets typically include spending for digital and traditional marketing activities. Businesses selling direct to consumers (B2C) spend an average of 5% to 12% of their revenue on marketing, while those selling to businesses (B2B) generally put aside about 8% to 9% of their revenue for marketing spend.

    Once you’ve determined an overall marketing budget, consider how much emphasis to place on digital strategies. As reported by Forrester Research, companies devote an average of half of their marketing budget to online strategies, such as SEO, direct email, social media, data analytics, and machine learning. Of course, if you have an entirely web-based business, you’ll likely spend a greater percentage of your total budget on digital strategies.

    How Much Should I Spend on SEO?

    According to The CMO Survey, nearly 74% of companies invest in SEO. Every business has distinct needs, however, and the amount you should budget depends on your business model and niche.

    Here are some questions to ask:

    • How does my target audience find my business?
      Companies that rely on digital channels, such as ecommerce, tend to invest more in SEO than those with traditional revenue sources.

    • How aggressive is the competition?
      If your competitors are ranking in the top spots for industry keywords, you may need to boost your investment in SEO to be competitive.

    • How well is my website optimized?
      Consider how much work needs to be done on your digital presence. Is the site outdated? How does your business currently rank in search engine results? Does your site have Google penalties that need to be addressed? A well-optimized site means that you are happy with your site’s online visibility.

    • What’s the current stage of growth for my business?
      Younger companies, for example, tend to spend more on marketing as a percentage of revenue.

    • How important is SEO to my industry?
      Companies working in consumer or B2B services are likely to invest more in SEO than those in manufacturing or health care.

    Sample SEO Budget Breakdown

    Bearing in mind the variables affecting an individual business, here’s a look at sample marketing and SEO spending. 

    I’ve applied industry benchmarks to create some average budget breakdowns for different types of companies (B2B or B2C) with different levels of revenue. I’ve added some granularity based on whether businesses are selling products or services.

    Company TypeAnnual Revenue% Revenue on MarketingTotal Marketing Budget$ for SEO*
    B2B Products$500 million12%$60 million$18 million
    B2B Services$100 million10%$10 million$3 million
    B2B Products$50 million12%$6 million$1.8 million
    B2C Products$25 million20%$5 million$1.5 million
    B2C Services$10 million15%$1.5 million$450,000
    B2C Products$5 million12%$600,000$180,000

    * 30% of Marketing Budget

    Data from The 2021 CMO Survey

    While this table suggests what your SEO budget might look like, your SEO budget breakdown should be tailored to your specific needs.

    Determining How Much to Spend on SEO

    There are a few methods you can use to budget for SEO, ranging from rough percentages of total revenue to more precise calculations based on marketing metrics. 

    Let’s walk through some of the options.

    1. Commit a Proportion of Your Overall Marketing Budget

    How It Works

    Set aside a percentage of your digital marketing (or overall marketing) budget for SEO based on how much you rely on website traffic to generate sales. An ecommerce business, for example, may need to spend more on SEO.

    What to Keep in Mind

    Allocating a percentage of your marketing budget is an easy calculation, but it doesn’t account for your specific SEO needs.

    2. Set a Flat Dollar Amount

    How It Works

    Examine the line items in your marketing budget and decide the amount you think you can afford to set aside for SEO.

    What to Keep in Mind

    Basing your SEO budget solely on what you’ve determined you can afford relative to your other marketing activities might mean you’re not spending enough to see meaningful results from an SEO campaign.

    In a large-scale analysis of SEO services, Backlinko found a direct correlation between spending and satisfaction.

    The data reveals that those who opted for low-budget SEO walked away less satisfied than those who invested more fully in SEO as a marketing channel.

    Remember, what you spend on SEO can improve the performance of other marketing channels.

    3. Match Your Competition

    How It Works

    Businesses that have competitors aggressively targeting industry keywords have to commit more to SEO to maintain a share of organic traffic. Compare your existing search engine rankings to your competition, and measure the opportunity cost of losing customers to them. 

    What to Keep in Mind

    This approach helps you decide whether or not you need to prioritize SEO. The next step is to determine the SEO budget you’ll need to outrank your competitors. 

    4. Consider Your Marketing Objectives

    How It Works 

    Think about your SEO goals in context of your broader marketing objectives before allocating a specific dollar amount to that line in your budget. 

    Are you relying on organic traffic growth to meet key KPIs like leads or sales? Or are you meeting your revenue goals and looking to expand to gain visibility and authority in your industry? Make sure you are setting the right internal expectations for your marketing investment, and make sure you are investing enough in the channel to achieve the desired results.

    What to Keep in Mind

    It takes advanced planning to align your budget with your objectives, but this ensures that your funds are distributed in a way that supports your goals.

    5. Compare the Value of a Competitor’s Organic Traffic

    How It Works

    Use metrics to get deep into the nitty-gritty of your budgeting. Sophisticated SEO tools can help you estimate the organic traffic your competitors are getting from SERPs, and you can use this figure to decide how much to budget for SEO so you can capture a share of that traffic.

    Estimating Organic Search Value

    Using a search engine optimization tool like Ahrefs, SEMrush, or SearchMetrics, you can see how much organic traffic your competitors are receiving.

    Ahrefs, for example, estimates the traffic a target page generates by pulling up keyword ranking data and estimated click-through rates.

    You can take this metric further and attach a dollar value to the organic traffic.

    1. Estimate the conversion rate of visitors to the target site. Average conversion rates are about 2.63% for ecommerce sites in the United States and vary by industry.
    2. Based on your industry knowledge, estimate the average value of those purchases.
    3. Calculate the value of the organic traffic by multiplying:

    For example, if a competing page has monthly organic traffic of 40,000 visitors, a 1% conversion rate, and an estimated average purchase of $50, the page is valued at $20,000.

    What to Keep in Mind

    This strategy relies on estimation, so it’s not highly precise. However, used consistently, it helps accurately advocate for the potential rewards of improving your search engine ranking. For example, if your site’s organic traffic is currently worth $30,000 per month, but a higher-ranking site has a value estimated at $50,000 per month, there’s an opportunity to take a larger market share through well-executed SEO. 

    You can use these figures to set goals for increasing your traffic and determining how much to budget for SEO to achieve them.

    6. Consider Customer Lifetime Value (CLTV)

    How It Works

    The benefits of organic traffic extend beyond a one-time purchase, especially if you focus on customer satisfaction, retention, and brand loyalty. This approach determines the value of a web page based on customer lifetime value (CLTV), which is the amount you can expect to earn from a customer over the course of your relationship.

    Budgeting for SEO Using CLTV

    Let’s say your business has a web page that gets 10,000 visitors a month. If you convert 1% of visitors, you’re selling to 100 customers a month. Now, if your customer lifetime value (CLTV) is $3,000, your web page is worth $300,000 over time.

    You can use this figure to work out an amount to spend on SEO. Perhaps you want your SEO strategies to lift traffic by 10%, generating another 1,000 visitors a month. With a 1% conversion rate, that traffic is directly bringing in 10 new customers, and your SEO investments have brought $30,000 of additional value to the page, amplifying your ongoing CRO or UX improvements.

    What to Keep in Mind

    If conversion rates figure into the profitability of your SEO efforts, you improve bottom-line impacts by increasing your website’s conversion rates. 

    Check out some of these resources for information on SEO and conversions.

    7. Determine the Effectiveness of SEO vs. Paid Search Spend

    How It Works

    You can also budget SEO in relation to your pay-per-click (PPC) ad spend, taking into consideration the effectiveness of each marketing strategy.

    Most companies spend more on PPC than SEO, according to Marketing Sherpa. However, SEO typically generates twice as much traffic. Research shows an average of 53% of website traffic is created by organic search results, while paid search generates about 15% of traffic.

    If SEO is more effective in attracting visitors to your site, consider re-apportioning your digital marketing budget to reflect SEOs bigger returns on your investment.

    What to Keep in Mind

    While PPC can generate fast results, once you stop running ads, your visibility drops. On the other hand, an optimized website that’s ranking well can gain momentum and continue to drive traffic over the long term. 

    You may want to consider a mix of SEO and PPC depending on your business needs.

    Check out our comprehensive comparison of SEO vs. PPC.

    The Case for Increasing Your SEO Budget

    As you start crunching numbers to figure out how much to spend on SEO, you may arrive at higher figures than you expected. Your budget stakeholders might not understand why this is necessary, so here are a few helpful points that you can take to the top.

    Bargain-Basement SEO Won’t Deliver Significant Results

    There’s a link between SEO spending and satisfaction. Backlinko found that customers who invested above a minimal threshold were 53.3% more likely to be “extremely satisfied” as compared to those spending less.

    SEO is Highly Effective Compared to Other Channels

    Rather than spreading your digital marketing budget too thin, prioritize where to spend that money to create the highest yield. 

    Consider that:

    • Organic search has an average conversion rate of 5%, higher than email marketing (3.9%), paid search (3.6%), and social media (1.9%).
    • Businesses receive an average of five clicks on organic search results for every one click on ads, according to Google.
    • SEO generates 1000% more visitors than organic social media.

    Let the numbers do the talking and plan your budget with the final ROI in mind, and visible to your stakeholders.

    Privacy Changes Are Impacting Online Advertising

    It’s common to throw money into PPC instead of SEO, in favor of what might appear to be quick results. There are all sorts of flaws with this approach (see above: planning budget with final ROI in mind), but the most timely piece of information to keep in mind when thinking about your 2021 budget is the impact of privacy regulations across the world.

    Third-party cookies track users as they visit different websites, helping marketers to target the right audiences for pop-ups and online ads. Google and Apple are introducing restrictions on third-party cookies for privacy reasons, a move that’s expected to reduce the effectiveness of digital ad strategies such as PPC.

    While marketers who rely on third-party cookies need to monitor their ad tactics, these changes don’t affect first-party cookies used to track customers on your own site. 

    Even in a changing online landscape, SEO remains a strong digital strategy.

    SEO Budgeting That Makes Sense for Your Business

    The budgeting process can work in many different ways depending on your organization, and I have leveraged each of these methods in the past in aligning my SEO budget (and other marketing channel budgets) with my annual goals. 

    But if I’m being honest, the way I planned for my SEO budget last year was simply by having a conversation with one of Victorious’s SEO consultants. The free SEO consultation is designed to hone in on the most impactful SEO opportunities your website could focus on, and identify the level of investment needed to see the most results. So it’s an effective and free way to really ensure you are investing at the appropriate level to make an impact for your organization.

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