How to Calculate ROI on SEO
Unlike other aspects of marketing, the impact of search engine optimization on any business is not always readily apparent. To make sure your clients, managers and other stakeholders appreciate your work, you need to show them the ROI of SEO.
It makes sense when you think about it. The balance sheet is the single most important thing to determine the success of any business.
If income is higher than expenditure, then the overall health of the organization is probably pretty good. Likewise, a negative balance can be an indicator of serious problems.
Accountants and money managers could give you long explanations of why that isn’t always the case, but that’s another topic entirely. For search engine optimization professionals, convincing a client to invest in your services is often going to come down to one thing: proving why SEO is a good investment.
To do that and put SEO in perspective, you need quantifiable data that shows the return on investment.
If you’re not sure how to do that, or just need a refresher on calculating ROI for SEO, you’re in the right spot.
What Does ROI Mean in SEO?
ROI of SEO is the metric used to determine the success of a SEO campaign. By measuring the return on investment of SEO activities, it shows the relationship between them and metrics like search ranking, search volume, organic traffic and, in some cases, website revenue.
Why is SEO ROI Important?
At the end of the day, most business decisions come down to the numbers. And being able to show the potential ROI of SEO is essential for proving the value of your work to decisionmakers, clients and management.
Now consider that roughly 53% of all web traffic comes through organic search. That statistic alone may be enough to convince many company leaders, but proving your ROI is also helpful when determining where to allocate your resources (including time) and measuring the overall effectiveness of your work.
How Do You Measure SEO ROI?
Measuring ROI for SEO is much the same as measuring the return of any investment. The formula is quite simple:
SEO ROI = (value of conversions – investment cost)/ cost of investment.
Of course the details of this can be a bit trickier, but don’t worry, we’re going to break it down step by step.
Step 1: Calculating Your Investment
The first thing you need to figure out is how much your company or client is investing in SEO. This is going to cover a number of things, including:
- SEO Labor Costs – This could include employee compensation, freelancer fees and/or agency retainers.
- Tools and Equipment Fees – Are you using SEO platforms like evisio or Ahrefs? Do you have dedicated computers for SEO? How much are server costs and website maintenance? It may be worth chatting with an accountant if you want to be extremely accurate here, but in most cases, you should be able to ballpark a figure.
- Content Distribution and Link-Building Costs – If you’re paying for links, this should be included. Likewise, be sure to add any costs associated with distributing your content.
This is the cost of investment in our formula.
Step 2: Track Your Conversions
Once you have determined how much you’re spending on SEO, it’s time to track and measure the value of each conversion it’s creating.
Open Google Analytics (or your favorite SEO tool) and comb the statistics provided for various types of conversions. For ecommerce sites, the most important of these is going to be revenue, but for other businesses, it could be things like leads generated from form submissions, quotes requested, phone calls or email list subscriptions.
To simplify this process, use conversion tracking tools. For ecommerce sites, you only need to add an organic traffic filter to your ecommerce to determine what percentage of your online sales are coming from Google searches.
To track lead generations is slightly more difficult and is going to require assigning a monetary value to each type of conversion. Sales and marketing staff are usually good contacts for this type of information.
Once you have this info, create an event for each type of conversion under Admin>Events.
Give your event a name and select parameters, operator and value. When these appear under “Existing events,” you can use the toggle to “Mark as conversion.” Use the “Parameter” field to assign a monetary value to these.
Step 3: Estimate Traffic and Revenue Based on Search Volume
Once you have data about CTR, conversion rate and total monthly searches, you can use a simple formula to calculate monthly value:
Total Monthly Searches x CTR x conversion rate = estimated monthly value.
This number tells you how much money your SEO work is bringing to a website and is used along with ecommerce revenue in the “value of conversions” part of our initial equation.
SEO ROI in Practice
There’s a reason your high school algebra book had word problems – it made it easier to visualize real-world uses for formulas. With that in mind, let’s look at an imaginary scenario and calculate the ROI of SEO.
John’s Sprinklers makes 1000 sales every month from organic traffic. At an average of $15 per sale, that gives us $15,000 in revenue from SEO.
The website also receives 10,000 monthly searches with a clickthrough rate of 5% at position #4. That’s 10,000 x .05 = 500 organic sessions.
Of these, 1% (or 5 people) fill out the form requesting a quote for sprinkler system installations, which are estimated to be worth $500 each (apparently, these are fancy sprinkler systems).
So, the 10,000 monthly searches created a conversion value of $2,500.
Adding the $15,000 from ecommerce to the $2,500 from conversions gives us a monthly value of conversions of $17,500.
Now, let’s pretend we’ve calculated our labor, equipment and other costs to be $2,500/month. Using our formula, that gives us:
(17,500 -2,500) / (2,500) = 6. Multiply this by 100 to get the percentage of ROI – a whopping 600%.
You don’t have to be Warren Buffet to figure out that’s excellent. And neither does your client or manager.
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