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Link building is an essential part of any SEO campaign. But how can you be sure that your team is seeing a strong ROI on link building efforts?

In this episode of Content & Links, we examine the formula for determining link value ratio so you can be sure the links you are generating lead you to positive ROI.

Video Transcription

Hey, everyone. Ross from Siege Media here. Today, I want to talk to you about link value ratio. I’ve done a video in the past on what a link is worth in your market, and the general concept of that is evaluating approximately what a link could be worth to you.

I think this is a good baseline for understanding that value, but another thing that is worth considering is what the ratio is in comparison to your business.

The link value basically takes the value of your traffic, divides it by the number of links, and gives you a monthly link number. You multiply that by 24 and you get the lifetime link value:

The link value ratio is basically the ratio of what a link is worth to you and how much it takes you to generate that link.

This is important because you want to effectively establish a ratio that allows you to be very profitable as a business. An example of this in action, there’s a website called GigMasters. In the booking space, they have a strong traffic value of $478,000, and a good amount of linking root domains at 6,900.

If you do the math here, their monthly link value is $69, multiply it by 24 months, that gives you lifetime link value of less than $1,650. This is not actually a super high number. If you are generating links for, say, $1,000 per link, this is a pretty bad, if not negative ROI ratio for you.

What you should effectively aim to do is have a ratio of about 10 to 1 in terms of the value of the link to what it costs you to generate the link. This equation of the lifetime link value does not incorporate on-page factors, which is too complex to add in.

If you look at the baseline of the lifetime link value against the cost to generate it, you’ll realize what is needed in order to be efficient there.

In this space, that ratio of 10 to 1 would be $165 per link. You can imagine this would basically need to be one of two things: gray hat link building or most likely generated in-house for them, because most gray hat solutions you can’t get a link for $165.

If they did that in-house and did gray hat, they might be able to accomplish it around $165. But, what’s unique about this space and why this matters on a per vertical basis is a lot of the people who book with them will link to them to promote that they can be booked. So, a DJ would have a link to GigMaster saying, “Go book with me.”

That’s why they’re able to generate so many links at that lower value. So for them, it’s not impossible to generate that low cost if they’re being deliberate about it. It’s actually pretty simple, especially if they’re doing it in-house.

But, if they went to an outside solution, you can see how that math wouldn’t really work out, and for them that link value ratio would not be nearly close enough to that 10 to 1 number.

It’s okay if it is 8 to 1, but 10 to 1 is even better. You can see in their situation, doing an infographic on their blog that they promote that maybe generates a cost per link in the $500 to $800 range, is just not going to make sense in terms of the math.

Those links are probably a little higher quality than the ones they have from their DJs and things like that, so that is a consideration as well. But, you can see how that could factor into your decision-making process there.

On the opposite end of the spectrum, we can look at a payday loan space for the company called LendUp. They have a strong traffic value of $757,000 per month, and a significantly lower number of links in 1,170 at the time of this shooting. And the reason for that is it’s hard to generate links — people don’t want to link to a payday loan provider.

Their link value ratio is going to mean they can generate links at a more expensive range and still be positive ROI. Their lifetime link value is $15,528 based on that math of basically that $750,000 divided by 1,000 gives them $647 per month, multiplied by 24 months gives them $15,000 link value.

You can see with that ratio in mind, if you divide it by 10, they can basically generate links at a cost of $1,500 per link and still be positive ROI and maintain that ratio that they need to be highly profitable in this case.

If you dropped it to 8 to 1, it would still be quite solid. And you can see in certain situations, if you just looked at the market and the world of link building, some people would be like, “Oh, it’s $400 cost per link,” or “It’s $1,000 cost per link, that’s really expensive.” The reality is that doesn’t include the context of the situation. For GigMasters, that cost per link is super expensive.

For LendUp, $1,000 cost per link is probably good, based on how difficult it is to get someone to authentically, organically link to that business. So, if they can achieve that through good PR and content marketing, they are doing a great job and a higher ROI.

So, my suggestion for you is to do this analysis, take that lifetime link value and then compare it to your cost to generate that link on average, and try to establish a ratio of 8 to 1, if not 10 to 1. If you can establish that, you’re doing a good job and likely are making good money from your SEO campaign.

If those numbers are a lot tighter, there’s likely something off and you need to re-evaluate how you do business or think about doing it internally to make those economics work, or externally to make them work. All those things can factor into that decision.

Hopefully this analysis of lifetime link value and also the link value ratio will allow you to think about ROI more concretely and make sure you’re making money from your SEO campaign.

So if you like this, please give us a thumbs up, subscribe, and let me know what you thought in the comments. Thanks for watching.

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