Just like any marketing channel, you have to demonstrate the return on investment or ROI that you receive from the SEO activities. Whatever marketing strategy you employ if you are investing money, then you should derive some value out of it. But most of the time, the measurement of SEO is reduced to tracking performance parameters like traffic and ranking positions.
Though calculating the ROI of the SEO campaign is possible. In this guide, we will tell you how you should do it and help you understand why it is crucial and the problems you might face in doing so.
An average business drives nearly 53% of its traffic through organic search. Now you can realize the revenue this channel is getting to your business.
While it is essential to measure the standard KPI’s the ultimate success parameter is your receiving a strong ROI.
If you do not know how much money you are getting for the dollars you have invested, it is impossible for you to know which of the channels in the marketing strategy is performing and which needs a boost.
These are just some of the metrics that the board will wish to see. Those at the topmost level want to know what the money they have invested is returning in the form of cash. If you are able to show a positive ROI, it means you are successful in your attempts.
The Challenges Of Calculating SEO ROI
For many years people have faced it challenging to find the ROI of SEO correctly. This usually happens because SEO does not have any particularly fixed costs assigned to it.
PPC comes with click costs so that you can consider it as an investment. But this is just a click cost of running the ad along with the agency fees. In simple terms, it means it becomes easy to find out how much money you have invested.
But SEO is difficult to calculate, probably because SEO is about getting organic visibility instead of buying it. You cannot associate a fixed cost with an organic click. That is where we will help you calculate your SEO ROI and offer you tips on how to calculate it accurately.
How To Calculate Your ROI From SEO
Now you must have understood why it is necessary to calculate the ROI from your SEO efforts. So, how can you calculate it?
1. Calculating Your SEO Investment
First, you have to calculate the cost of investment in SEO. How will you accurately measure the ROI? You have to combine all the costs that are linked with that channel, and you can use it as an investment figure. Mainly these costs comprise of:
In-house SEO Resources
You can easily calculate the costs of in-house resources if you know which people are working on SEO 100% of the time. But if you have roles like copywriters and developers doing this job, you will have to break down this cost to either an hourly or daily rate. This cost will depend on the tracked time, so if your team keeps an eye on the time spent on SEO, you will not find it tough to calculate this cost.
In case you are working with an SEO agency, then it is easy to calculate the costs. Most of the agency engagements are done on a retainer model and come with a fixed monthly fee. To calculate your investment, consider the agency fees.
Investment Into Tools
Tools are that SEO investment that we have forgotten to talk about. Some of the businesses put the cost of tools and software also as a technology cost. This helps them understand the ROI of the SEO activity. But have to include tools when you start calculating the investment value.
For example, if the team is using SEMrush, you have to consider its monthly cost along with the cost of any other software that you are using. If there are software costs for different departments, you can take a percentage of the amount that your team is operating compared to others.
Just add these costs, and you will get a figure that you can use to add the investment part of the ROI calculation. Always remember that the prices might change monthly, and that is fine. Just ensure that you add these changes when you go about calculating the success metric next month.
2. Tracking And Analyzing Conversions
Calculation of ROI from SEO does not mean using complex formulas. You just need to know the figures you have to input. Since the cost of your investment is already recorded, you have to track and measure the conversion value.
This, however, is not the same for every website. But there are different calculation methods for eCommerce and lead generation sites. Google Analytics comes to your rescue here. It captures the revenue of your business from organic search.
Tracking eCommerce Conversion Values
In case you have set up eCommerce tracking in Google Analytics, you can check all the metrics required. But if you, don’t it is quite easy to set up. Go to the Analytics account and navigate around to:
Admin > View > eCommerce Settings
An easy toggle will show if you have turned it on or not. If it is not turned on, go on and do so and follow our guide to add the required code to the website, which collects all your eCommerce data and sends it to Analytics.
You may have to discuss it with your developer to do it.
It totally depends on the access you have and the experience level. By enabling this report, you will get access to eCommerce reports that you can see under the conversions tab of the Analytics view.
You may then segment all of them by channel. This will show you specific data to get organic traffic coming to your website.
The critical matrix that you have to use here is revenue.
Tracking Lead Generation Conversions Values
When you are working for a business where the conversion you are looking at leads, it is challenging to keep track of the conversion value. Different from an eCommerce transaction, the lead does not get any associated value because its conversion actually happens offline. Plus, it is not necessary that every generated lead will convert into a paying customer.
To assign a goal, you have to go to Google Analytics and do the following.
Admin > View > Goals
When you decide to set up a new goal, you can either select from a template, smart goal, or a custom goal.
Here you should choose ‘custom.’ Select the goal type, and then you can see an option named ‘Value’ on the Goal destination screen. Now assign a monetary value to every goal that you set.
You can use this information to calculate the SEO ROI, which is based on the average value of your generated leads.
Every time they track a goal completion, this will give the required monetary value. But how will you find out the value that you must enter here? The easiest and also the most effective tactic is if you use the calculation of.
Customer Lifetime Value X Lead Conversion Rate
Customer LTV is usually the average spend that any customer makes with a business over a period of time and the lead conversion rate is the percentage of leads generated that are converted into actual sales.
So if the average lifetime value of a customer is $20,000 and the rate is 15%, then your goal value has to be $3000.
But this value is based on assumptions. Yet this is a proven method to find the return for any business where leads are considered the main source of conversion. You must then find the value of the organic leads you generated by going to:
Conversions > Goals > Overview
Now filter this by organic traffic and get the ‘Goal Value.’
At this point, you have both the cost of investment into SEO and the revenue that was generated. You can then calculate the SEO campaign’s ROI.
3. Calculate Your Return On Investment
Now that you have the data you require, you can easily calculate the ROI from SEO.
You may use this formula to do so:
(Value of Conversions – Cost of Investment) / Cost of Investment
Let us understand with an example. Supposing for over a month, the SEO campaign generated a revenue of $200,000, and the costs you generated are $40,000.
Now enter the figures in the formula and you will get:
($200,000 – $40,000) / $40,000 = 4
This means that for each $1 spent on SEO, you received a return of $4. In simple words, the ROI here will be 400% (i.e., 4*100%). You may use the formula to calculate the ROI of the SEO campaign. You just have to know the total costs and returns.
A Note on Attribution
There is, however, one crucial aspect that we need to keep in mind when we talk of calculating the ROI of our SEO activities, and that is different methods of attribution.
By default, Google Analytics will use Last Non-Direct Click conversions. This means that the conversions are attributed to the channel that brought a visitor to the website unless he reached through a direct hit. Here we must remember that a majority of the customers need many interactions with the business before they decide to convert. As per Ruler Analytics, this could be up to 20 values.
Maybe they first reached the site through organic search then came again through a PPC ad. The sale is then attributed to the PPC channel and not organic search, even though the latter led the user to go to your business.
For you to understand the value of every channel, you will have to go to the Assisted Conversions Report. Find out on Google Analytics by :
Conversions > Multi-Channel Funnels > Assisted Conversions
Here you may see both ‘assisted conversion value’ and ‘last click value’ next to each other.
As we can see here, the last click conversion value of organic search is around $8,137.47, while the assisted conversion value is approximately $14,061.72.
But it is critical that you ensure that all the channels are reporting to you in the same manner. If that is not happening, then you might be doubling up on some of the conversions. In case you report the SEO ROI using this assisted conversion value and the PPC team is using last or the first click, you might be getting a false report.
Having said that, understanding of assisted conversions is another method to show the impact that your SEO practices are having on the revenue and returns.
Getting to know the ROI of your SEO efforts is necessary and one that you can use to get more buy-ins for investment and also show the success your strategy is bringing in the form of revenues.
Now calculate and report it regularly. Most of the stakeholders will not understand anything if you say that you increased organic traffic by 200%. On the flip side, they would be curious to know more if you tell them that their $1 investment in SEO resulted in $4 returns.
Is SEO Profitable?
We know that calculating returns on SEO are necessary, but here are some practical benefits that you get after doing so.
1. SEO Can Increase Sales
Organic search is a traffic-inducing channel that helps you to attract as much traffic as you want.
Having optimized content does not just get you vanity traffic. Creating content that answers the queries people are having about you is a perfect way to attract valuable traffic to the site-i.e. people who will surely buy from you.
If you monitor the search demand of your industry and create content that satisfies those needs, you can fill the sales funnel with people who are willing to purchase your offerings.
2. SEO Can Reduce Paid Ad Spend
By investing your money in SEO, you can also reduce your reliance on advertising methods like PPC. Though paid advertising brings a lot of targeted traffic to the website, you will have to pay for each of the visitors. Plus, this cost may change based on how many people are bidding on the terms, how much they are bidding, etc.
Though the effort it takes to get placement in the organic search results is not free, the traffic you receive is. It also will not stop showing the moment you stop paying for the ads.
If because of your SEO campaign, you can rank well for a keyword that you are paying a considerable amount for in PPC, you can stop bidding on it as now you are getting relevant traffic that is free through organic search.
3. SEO Can Increase Profits From Content You Already Invested In
There is also a chance that you have organic traffic potential with the content that is already present on the website. Many visitors assume that just because the content exists on their website, it will show in search engines.
However, this is not always true. Google ignores nearly 50% of the content that is present on a website.
Apart from that, the content Google can find may not show well in the search engines implying that the target audience will not find it. For example, suppose you have 10,000 pages on the website. Google might find only half of these pages. This means that though you paid for 10,000 pages, you are getting profit from 5000 only.
Plus, the reality is that only a fraction of that number will rank on the first page of the Google search results. Assuming it is only one-third, then only 1650 active URLs are actually yielding any profit.
Instead of making the website to work at a fraction of the potential, you may boost its ROI by investing in the SEO strategies that help the search engines to index more of the web pages than you have paid for,
4. SEO Can Decrease Your Customer Acquisition Costs
Unlike all the paid traffic options like Google pay per click, the traffic you get through optimized SEO practices is free. Instead of paying for every person who visits your website and then the traffic is gone once your campaign ends, SEO will give you benefits from the continuous free traffic that search engines bring over time.
So if you continue working on SEO, you could boost the total number of visitors coming to your website while the costs will be identical. Getting more customers without a change in the costs will reduce your customer acquisition costs with time.
5. SEO Can Safeguard Your Traffic And Revenue Against Losses
If you do not monitor and manage your website to see that it meets SEO requirements, unforeseen issues could damage your revenue and organic traffic.
These issues can be:
Technical issues: Even small changes made to the website could lead to problems. Without monitoring SEO, you may not find these problems until they damage your traffic and rankings.
Algorithm updates: Google releases many minor updates to its algorithm every day and some of the changes annually. If you do not match with these changes, you are going to lack behind.
Competitor strategies: Even if there are no technical issues and updates, your organic performance may dip. If you do not pay attention to your SEO does not mean that a competitor will also not do so. This means that your inaction would cost you dearly; hence do not ignore SEO.