You know that it’s important to do ongoing search engine optimization for your website. A key question is how do you measure the SEO ROI for your business?
Studies have shown that 53% of website traffic comes from organic search results. Growing your visibility and rankings in the search engines grows organic traffic.
What is organic search traffic and why is it important?
Organic traffic is traffic (visitors) that arrives at your website when a person types a query (words, numbers, questions) into a search engine such as Google or Bing and clicks on your listing in the search results.
Search engine results pages, commonly referred to as SERPs, can contain both organic results and paid ads.
Ads within the SERPs cost a business a click fee each time someone clicks on the ad.
Organic traffic is important because you don’t pay for organic traffic. Each time someone clicks on your organic listing in the SERP there is no charge to you from the search engine.
SEO Investment
Investing in SEO delivers more organic traffic, more conversions, increased visibility, and can help you to spend less money to attract customers. However, there are also costs connected to SEO.
Subtracting costs from the benefits of SEO provides a good view of your return on investment from optimization efforts.
Calculating ROI from search engine optimization can be challenging at first and the methodology used will vary depending on the type of business.
While identifying the return on investment for your ongoing SEO work is not a single, easy-to-calculate metric, there are definite ways to gain clarity with actual numbers.
Benefits of SEO – the Short List
Before jumping into the methods of calculating ROI, it will be useful to take a moment to review a few of the key benefits of performing search engine optimization. Many are relevant assessing ROI.
- SEO done effectively means better rankings in Search Engines and more organic traffic to your website. Key fact: you don’t pay the search engines to send organic traffic to your website.
- Impact of your targeted SEO keywords ranking well in organic search results is significant The first 3 organic search ranking positions deliver over 60% of all click-through visitors to a website.
- 95% of traffic that comes to a website through Google is from the first page of search results.
- Page 2 search results get less than 5% of clicks, Page 3 results get less than .1% of clicks.
- On average, moving up 1 spot in the search results on page 1 may increase the click through rate (CTR) to a website by up to 30%. [source]
- Better rankings in the SERPs means greater visibility with more people clicking through to your website.
- More targeted traffic (website visitors) leads to more conversions occurring on your website.
- Conversions can include product sales, new service clients, new sales leads generated, new connections with business partners or resellers, or signups for an email list.
- SEO is an investment, not merely a marketing cost.
- It’s quantifiable when using proper tracking and analytics.
- SEO provides actionable data for decision making and improving website performance.
Intangibles – SEO delivers a number of benefits beyond sales and conversions. These include a better performing website, a better user experience for visitors, plus greater brand authority and trust through increased organic visibility in search results.
Or Not. On the opposite side of investing in SEO there is the cost of inaction or not optimizing your website and web presence for ranking well in the search engines.
- If you aren’t doing SEO you are falling behind your competitors who are.
- Your competitors are doing search engine optimization even if you aren’t.
- A recent study estimates the SEO expenditures will grow at a rate greater than 17% per year through 2025.
- Put another way, “If your customers aren’t finding you online, they are finding your competitors.”
Search Engine Rankings – A Moving Target
Search engine optimization is not something done every few years and it is not a “set it and forget it” activity.
The search engines are not static environments. Effective and ongoing SEO work adapts to frequent changes implemented in Google, Bing and other search engines..
Like most things on the web, search engines change and evolve. Frequently. Google confirmed that it made 4,500 changes to search in 2020 and close to 5,000 in 2021. [source]
How do I calculate the ROI for My SEO Investment?
OK, you are committed to an ongoing SEO program for your business. How do you begin to get your arms around calculating the return on your investment?
Methods of determining SEO ROI will vary depending on the type of business. Website visitor actions, sales patterns, revenue per sale, customer acquisition tactics, and customer lifetime value will factor into identifying conversions and revenue from SEO activities. Here are several examples.
- Additional clicks/visitors gained from SEO – how much additional website traffic (visitors) will your SEO program generate on a monthly basis from higher search engine rankings for keywords and pages.
- Identifying what is and isn’t a conversion – Conversions can take many forms with some conversions not resulting in a sale or revenue during the first interaction or conversion. It’s important to identify and track conversions.
- Conversion rate – what percentage of these new visitors will convert. Your historical analytics data can provide insights on this.
- Revenue or value per conversion – conversion could be a product sale, a new service client, a lead that was generated, or a sign up. For conversions that don’t results in a dollar amount during the first visit it is still feasible to assign a dollar amount based on longer term projected value for the conversion.
- Estimated Monthly Revenue – Increases in conversions from SEO activities multiplied by the average value of the conversion will provide the increased revenue per month.
ROI calculations For SEO
Now on to the actual calculations. Below are sections highlighting revenue, costs, and top level calculations. They are followed by detailed examples for two different types of businesses.
Revenue Attributed to SEO Activities
The key for this calculation is being able to attach actual numbers to revenue increases. Identifying and tracking conversions from new visitor traffic generated by increased organic search visits will be an important element.
Google Analytics is a very effective tool for tracking conversions. Once you are gathering conversion data you will be able to attach actual revenue gains to SEO efforts.
Costs for SEO Activities
The cost segment of the equation can include in-house labor costs, monthly and annual costs for SEO tools and applications, and agency costs if working with an agency. These costs will vary depending on a number of factors including size and structure of the company’s website, rate of change in website content, and changes in competitors.
Example or SEO ROI Calculations:
Increased revenue from organic traffic – SEO work costs = ROI
Revenue Increase of $10,000/month
SEO Work Costs of $3,000/month
= Net Monthly Gain or ROI of $7,000 per month
= Net Annual Gain or ROI of $84,000 per year
Return On Investment can also be expressed as a percent
(Increased revenue – SEO work costs)/Increased Revenue x 100
($10,000 – $3,000)/10,000 x 100 = ($7,000/$10,000) x 100 = 70% ROI
Calculating SEO ROI for 2 Different Business Types
Below are two examples of calculating SEO value from both a product based and a services based business. The numbers and starting assumptions will vary by business and inputs can be modified as appropriate.
Business #1 – Services based business scenario that includes:
- Generate: 1,000 additional organic click-throughs (visitors) per month.
- Convert: Assume a 1% conversion rate or 10 conversions (services sales) per month.
- Sell: Assume $1,000 in additional services revenue per new client.
- Delivers: $10,000 additional monthly revenue, or $120,000 year.
- Variables: Increasing the number of additional visitors per month or revenue per new client, or total number of conversion (new clients) will impact the total revenue per month and year.
Business # 2 – Ecommerce business scenario for a single product
- Generate: 1,000 additional organic click-throughs (visitors) per month for a single product.
- Convert: Assume a 2% conversion rate or 20 conversions (product sales) per month.
- Sell: $40 in additional revenue for a single product sale.
- Delivers: $800 in additional monthly revenue x 12 months = $9,600/yr.
- Other Products: Will your SEO program will cover a range of products? In the above scenario if you could drive similar sales growth to 20 products you would see a revenue growth of $16,000 per month and $192,000 per year.
- Variables: Increasing the number of additional visitors per month or revenue per product sale, or total number of products being sold will increase the total revenue per year.
Customer Lifetime Value
Another value aspect that can sometimes be overlooked is Customer Lifetime Value. This is also referred to as LTV or CLV, and can be an important metric for determining SEO success and value gained from optimization work.
Will the new visitors from organic search who convert return in the future and generate additional revenue over time? Are current customers or clients making repeat purchases? If so, at what frequency?
It is important to look at the lifetime value of a newly acquired customer and not just as a single sales event.
Conclusion, Next Steps and Recommendations
Search engine optimization is an essential piece of an online marketing strategy to grow a business. Like other marketing programs, SEO ROI should be evaluated and measured on a continuing basis.
Using tracking and analytics tools such as Google Analytics, Google Search Console, Bing Webmaster Tools and other applications can provide very effective metrics.
Whether you are measuring ROI based on tracking of visitor traffic levels or in-depth analysis of conversions, multiple types of conversion measurements, lead generations or ad clicks, ongoing measurements are crucial for the long term success of your business web presence.
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