How to Calculate ROI on SEO

Compared to other marketing aspects, search engine optimization's impact on any business is only sometimes readily apparent. To ensure your clients, managers, and other stakeholders appreciate your work, you must show them the ROI of SEO.?

It makes sense when you think about it. The balance sheet is the most crucial 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 explain 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 will often come down to 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 unsure how to do that or 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. Measuring the return on investment of SEO activities 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?

Most business decisions come down to the numbers. Being able to show the potential ROI of SEO is essential for proving the value of your work to decision-makers, clients, and management.?

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 on 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

First, you need to figure out how much your company or client is investing in SEO. This is going to cover several 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 highly accurate here, but in most cases, you should be able to ballpark a figure.?
• Content Distribution and Link-Building Costs – This should be included if you’re paying for links. 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 e-commerce sites, the most important of these is revenue, but for other businesses, it could be leads generated from form submissions, quotes requested, phone calls, or email list subscriptions.?

To simplify this process, use conversion tracking tools. For e-commerce sites, you only need to add an organic traffic filter to your e-commerce to determine what percentage of your online sales are coming from Google searches.?

Tracking lead generations is slightly more complex and will 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 e-commerce 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 1,000 sales every month from organic traffic e-commerce transactions. 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, 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 e-commerce to the $2,500 from conversions gives us a monthly value of conversions of $17,500.

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 ROI percentage – a whopping 600%.??

You don’t have to be Warren Buffet to figure out that’s excellent. And neither does your client or manager.?

Tell me about your ROI metrics in the comments below!

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Copyright November 14, 2023 by Michael Ramirez. Contact for usage license.?Opinions?expressed?are solely my own.

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