Did you know that organic search accounts for 53 percent of website traffic? And in 2021, 61 percent of marketers considered search engine optimization (SEO) their top marketing strategy.
If you’re an SEO consultant or business manager, SEO return on investment (ROI) is a common topic you’ve to address when allocating your marketing budgets and resources.
If you want to keep driving traffic through organic search and rank your site high on search engines, it’s crucial to stay updated with the latest SEO best practices, statistics and industry trends.
While the SEO approach is a long-term investment, it can give you the desired results if you know how to execute it in the right way. The common question many businesses ask is, what is a good ROI for SEO? Well, it depends.
This article will help you understand how to measure the ROI of SEO, calculate the value for organic conversions and the challenges you may face while measuring SEO ROI. Let’s get started.
What Is SEO ROI?
SEO ROI is a profitability measurement and key performance indicator showing how much profit or marketing results a business yields by investing in search engine optimization.
To determine the value of your SEO investment, look at your search engine rankings, goal completions and organic website traffic. This way, you can easily measure your ROI. ROI is expressed as SEO revenue-cost of SEO investment divided by the cost of SEO investment.
Your website will have a positive ROI if your SEO campaign’s organic revenue is higher than its cost.
The Importance of Measuring SEO ROI
Search engine optimization strategies are constantly evolving, and an undeniable fact is that without an online presence, your brand faces a digital uphill battle.
In today’s world, digital marketing is necessary for every business. While it takes time to see results from an SEO campaign, here are the top reasons why measuring your SEO ROI is essential for your business:
- ROI is one of the most significant measures of success from a well-executed digital marketing plan. Once your content finds its way to the first page of search engine results pages (SERPs), each new search reinforces its relevance making it attract potential customers months or even years after it was published. Through sales and conversions, you can measure your standard SEO performance indicators.
- ROI helps you understand your customers’ behavior. Knowing your SEO ROI helps you identify the numbers from your SEO campaigns and clarifies what strategy works best for your audience, generating the highest income based on the investment. With the ROI of SEO as a crucial metric for lead generation, you can make more informed decisions unique to your business.
- ROI showcases your business’ progression. Once you’ve identified the return on investment of your SEO campaigns, you can conveniently track and replicate your advertising success. You’ll be able to understand the actual financial value of your marketing channel and improve your customer’s experience in the process.
Correct and continuous SEO ROI measurement has incredible advantages. In a nutshell, measuring SEO ROI indicates whether your SEO marketing efforts are profitable to your business and helps you determine the appropriate digital revenue-driving channels.
How To Calculate the ROI of SEO
The return on investment metric calculates how much your business earns by investing in Search engine optimization.
And while the calculation of the ROI of SEO varies from company to company, the standard formula used by most businesses is: SEO revenue-cost of SEO investment divided by the cost of SEO investment.
So, how do you calculate the ROI of SEO? Here’s a step-by-step guide:
Step One: First, calculate your SEO investments. Identify and combine all the costs associated with your SEO campaign. Typically, these costs include; SEO tools, in-house employees, SEO freelancers and agencies and, finally, content distribution and link building. Let’s look at them one by one.
- SEO tools. Calculate all your subscriptions for SEO tools like Semrush, Ahrefs, etc., and consider the costs.
- In-house employees. Count your dedicated SEO and content creation employees, designers, developers, and anyone else that spends time on SEO tasks. Break down these costs into hourly or daily rates based on tracked time.
- SEO freelancers and agencies. If you hire SEO agencies or freelancers, in many cases, they’ll be the ones measuring the SEO ROI. Therefore, consider including the daily or monthly fees associated with the SEO campaign in your investment calculation.
- Content distribution and link building. SEO goes beyond publishing content. Therefore, include content promotion costs, and if you buy links, consider including those costs too.
Combine all these costs into one figure over a desired period of time, usually a month. You’ll notice that these costs may vary monthly, but that’s okay.
Step Two: Track and analyze conversions. Since you now have your investment costs, you need to track and calculate the value of your organic traffic conversions. You can use Google Analytics to capture your business revenue quickly. To measure your SEO ROI, you need to segregate the data using the organic conversion filter. For example, to track your eCommerce revenue, go to your Google Analytics account and navigate your way to the eCommerce setup. Follow this guide to set up the eCommerce tracking.
Under the conversions tab, enable the eCommerce report, and choose your specific data. In this instance, for organic traffic, the key metric will be revenue.
You now have your SEO investment cost and the generated revenue at this phase, and are ready to calculate the ROI of your SEO campaign.
Step three: Calculate your ROI of SEO. Once you’ve the data required, you can calculate your Return on Investment using this formula: Total SEO revenue generated minus Total SEO investments costs, divided by the total SEO investment costs.
Calculating SEO ROI With an Example
Using a straightforward formula (Total SEO revenue generated minus Total SEO investments costs) divided by the total SEO investments costs, you can measure your SEO ROI. To help further illustrate how this works, let’s plug in some numbers.
Scenario
Step one: Assume that for September 2022, your total SEO investment costs were $100,000, and your SEO campaign generated total revenue of $400,000.
Step two: If you put these figures into our formula above; ($400,000-$100,000)/$100,000, we get $4. What does this imply?
For every dollar you spent on your SEO campaign, you got a return of $4. Hence, your ROI is four times more than your investment, 400 percent.
How To Find the Dollar Value of Your Conversions
Conversion values help optimize and track your SEO campaigns’ return on investment. If you want to find the dollar value of your conversions, it’s important to consider the following factors: repeat businesses, lifetime customer value and word-of-mouth referrals.
If you take into account these values, you’ll have the flexibility of confidently bidding higher or below your value per click.
The Challenges of Calculating SEO ROI
While the standard formula for calculating SEO return on investment is pretty simple and straightforward, there are a few limitations and challenges that you need to be aware of. I’ll address these challenges and offer a few suggestions along the way.
1. Marketing and advertising attribution are inherently flawed. Marketing and advertising attribution evoke many discussions. Customer journey throughout the sales funnel is much more complex and more like a spider web (rather than a linear path) than how analytics software makes them look. Therefore attributing revenue to a specific tool, such as SEO, can be tricky. Data-driven attribution (DDA) is the solution for this.
2. There are immense time discrepancies between investments and return periods. SEO can take months to yield returns on the investment. Sometimes, you can have quick returns, but it’s not guaranteed. Linking specific SEO investments to specific ROI is often impossible. Hence the simplified principle of comparing the same investment and ROI periods fails technically. To best calculate this, start calculating SEO ROI on the category, keyword, or page level. This way, you can measure returns yield by specific pages and also know how much investment you have made.
3. The connection between SEO and brand building. Where brand strategy and SEO converge, it’s often challenging to evaluate what revenue came from which marketing tool. Let’s take this example, you browse some Youtube videos and come across an interesting product. You then head to Google, search for that product or brand and proceed to make a purchase. Who takes the attribution for that conversion? I bet your answer is organic traffic. And it’s 100 percent attribution. In this case, SEO gets credit for that sale instead of Youtube brand building. Social media ads, search and show adverts are more prominent and can make a bigger contribution to conversion.
4. One cannot measure the retention impact of SEO. The retention effect of SEO can be subdivided into two categories.
- As people interact and learn to use the tools, it leads to reducing churn charges.
- The content about tools and features in higher-price plans motivates some individuals to upgrade their monthly subscriptions.
These two categories, therefore, show that SEO has the power to extend a shopper’s lifetime worth because items of content material overlap with the nurturing and retention phases of the marketing funnel. However, this makes it challenging to take SEO impact into account when calculating the SEO ROI.
5. Forecasting future ROI. Setting up SEO goals and objectives and ensuring you’re on the right track is crucial to forecasting future ROI. Forecasting is more sophisticated and requires discipline before coming up with numbers. To make an accurate ROI prediction, you should set aside your biases (for example, what you want to be true) and conduct extensive research (what is true).
6. SEO testing has limited capabilities. If you want to understand the contribution of your marketing channel better, cease running campaigns on it for some time. The challenge with SEO is that you can’t just decide to turn it off. Oh, well, you may. However, no sensible business or marketer will sabotage their SEO. It could lead to long-term detrimental effects on your site.