Calculating the ROI of SEO
As search marketers, one of the most common questions we get asked is: How do you calculate the return on investment (ROI) from a search engine optimization (SEO) project? These questions come from a number of sources, including those looking to:
- Justify spend on a new SEO project.
- Increase spend on an existing SEO project.
- Transfer funds from other marketing channels to SEO.
- Reduce their spend on paid search and increase spend on SEO.
It is great when we are asked this question, as generally, the ROI for an SEO project is high and outperforms other marketing channels. We believe that all marketing channels should be subject to detailed scrutiny and we encourage rigorous ROI analysis where all available strategies are evaluated on a level and transparent playing field.
In this article, I will outline how we approach the ROI calculation and identify some of the common pitfalls in the process. In general, the process is as follows.
- Baseline current traffic
- Estimate potential additional traffic
- Value new traffic
- FAQ: How can I calculate the return on investment (ROI) of my SEO project?
Having a representative baseline is a key part of accurately measuring your progress. Use non-brand SEO traffic as the key measure, as total SEO traffic is impacted significantly by changes to brand SEO traffic from other marketing initiatives, and non-branded SEO traffic is the cleanest measure of an SEO project.
Identify a baseline traffic number that is representative of the average current state of the non-brand SEO traffic. For example, if the traffic has recently increased, should the baseline be the average of the past 2 months or 6 months? Ensure any recent changes to the website that may impact SEO are taken into account in determining the baseline. Then, if less than 12 months are being used, consider if any seasonal factors need to be taken into account.
The potential traffic can be estimated by using data from your analytics program, Google Search Console, ranking monitors, and search engine search volume data.
The process involves calculating the search volume available per keyword, and then adjusting that for the change from current rankings and click-through rates to estimated rankings and click-through-rates achieved by the SEO project. We use a combination of company-specific, industry and general search engine click-through-rates as part of our calculations.
Ensure that the anticipated rate of implementation of the recommendations and a time lag to account for the search engines to index and understand the changes, are factored into the traffic timing.
Remember to adjust for natural growth in search volume and company growth from baseline. These growth rates should be excluded from the estimated additional traffic, as this traffic would be expected even if the SEO project were not completed.
If your calculation of estimated traffic has been based solely on Google numbers then gross up the estimated traffic increase to reflect the estimated traffic from all search engines
Potential additional traffic per month, less the monthly traffic baseline, will give you the projected increase in traffic per month.
There are 2 key valuation methodologies that we use. The first is based on identifying the additional value of the SEO traffic driven to the site. In this method, apply a conversion rate to the additional traffic generated and then multiply that number by the value of a converted click. If this data is not available, it is still worth estimating these numbers based on the best available data, in order to get some indication of the value of the traffic. Also, consider that there may be multiple conversion points and ensure this is factored into the analysis.
The next key decision is to identify the time period over which the SEO project will continue to provide the additional traffic. This varies between projects, companies, industries, and the level of competition and will require judgment and analysis to identify the most appropriate period. We generally use a number between 12 and 24 months to calculate the total additional SEO traffic.
The value of the additional traffic less the cost of the SEO project is the ROI. The cost of the SEO project should only include additional directly attributable internal and external costs, but should exclude sunk costs (costs that would be incurred regardless).
The second methodology is based on the replacement value of the SEO traffic. This is valued based on traffic from other channels (e.g. paid search, banners, affiliates etc), or whichever is deemed the most appropriate representation for your business.
As an example, let’s use paid search. In this case, take the additional SEO traffic estimate and adjust for the different conversion rates between paid search and organic search. Generally, organic search traffic converts at a much higher rate than paid search due to the higher level of trust associated with organic search traffic. We generally use a multiple of between 2 and 5 to gross up the traffic estimate required. This means that you will have to buy between 2 to 5 times more traffic to replace the SEO traffic.
Then, calculate an average cost per click to apply to the estimated traffic increase. This will need to be based on the current average cost per click across non-brand keywords but also take into account the uplift in cost per click that may be required to purchase more traffic and the level of optimization of the current paid search campaign. The cost savings from not having to purchase the SEO traffic less the cost of the SEO project is the ROI.
In the above analysis, it may only be possible to do the analysis on a sample of keywords. Ensure that the results from this sample are correctly extrapolated across the entire population.
Depending on the timeframes and size of the numbers, it may be necessary to use traditional net present value calculations to identify the true ROI.
We recommend using both the above methodologies, if possible, and coming up with a range of results based on different levels of investment. This will assist in determining how aggressive to be when it comes to SEO.
It is important to note that the above methodologies do not measure the full value of the SEO project as there will be corresponding increases in brand SEO traffic and increased referral traffic (from building links and online branded presence), which are not included in the above calculations.
I am sure you will find, as we do, that SEO projects normally have a very strong return on investment and are one of the best-performing channels.
Recent changes to the algorithm will have a significant impact on the above analysis. For example, different types of algorithm updates such as Core Updates will have a significant impact on recovery and how long it takes to recover.
A robust forecasting and ROI process with clearly outlined assumptions and analysis will assist with supporting the case for SEO investment.
Maximize your ROI with our tailored SEO strategies – uncover the potential, value, and true impact of your SEO projects, outperforming other marketing channels and driving sustainable growth. Talk to us.
Calculating your Search Engine Optimization project’s return on investment can give valuable insight into its success. As an expert in this field, I can assist in the navigation process and provide invaluable guidance that makes life simpler for you.
- Define Your Goals and Objectives
Setting clear and measurable SEO campaign goals before beginning to calculate return on investment (ROI). Define what it is you hope to accomplish; whether that be increasing traffic, increasing conversion rates, or raising brand visibility.
- Track Your SEO Expenses
Calculating ROI requires an in-depth view of all expenses related to an SEO project, including expenses related to content production, linking, SEO tools, and personnel involved with it.
- Monitor Your Organic Traffic
An increase in organic traffic is a fundamental indicator of SEO success. Google Analytics is an invaluable tool for keeping track of search engine visits to your website, giving you insight into how SEO efforts impact its visibility.
- Analyze Conversion Rates
The ultimate goal of SEO is often to drive conversions. Be it product sales, sign-ups, or inquiries, monitoring your conversion rates is essential. Compare pre-SEO and post-SEO conversion rates to gauge the project’s impact.
- Calculate Revenue Attributed to SEO
Determine the revenue generated from organic traffic. This involves assigning a value to each conversion and multiplying it by the number of conversions attributed to SEO efforts.
- Calculate ROI
The formula for calculating ROI is simple:
\[ ROI = (Net Profit / SEO Investment) x 100 \]
– Net Profit is the revenue attributed to SEO minus your SEO investment.
- Consider the Time Frame
Calculating ROI should be performed within a specific timeframe, such as quarterly, yearly or monthly depending on the business cycle.
- Continual Monitoring and Adjustment
SEO is an ongoing process, and ROI should be tracked regularly. Adjust your strategies as needed to improve your ROI over time.
- Consider the Lifetime Value of Customers
Do not underestimate the significance of customers acquired through SEO; this will give you a clearer view of its success.
- Distinguish Direct and Indirect ROI
Recognize that not all SEO benefits are directly quantifiable. Some improvements, like brand awareness, may indirectly impact ROI.
Calculating SEO ROI requires an analysis of analytical data, an in-depth knowledge of your goals, and a dedication to continuous improvement. While the process might appear cumbersome, it can help optimize SEO strategy and maximize digital marketing investments.
Following these steps will provide invaluable insight into the success of your SEO campaign, enabling you to make informed decisions and enhance strategies to achieve even greater success.
Step-by-Step Procedure for Calculating ROI of Your SEO Project:
- Define clear and measurable goals for your SEO project.
- Track and record all expenses related to your SEO efforts.
- Monitor and analyze organic traffic using tools like Google Analytics.
- Compare conversion rates before and after your SEO project implementation.
- Calculate the revenue directly attributed to SEO efforts.
- Use the formula \[ ROI = (Net Profit / SEO Investment) x 100 \] to calculate ROI.
- Select an appropriate time frame for ROI calculations (e.g., monthly, quarterly, or annually).
- Continuously monitor and adjust your SEO strategies for ongoing improvement.
- Consider the long-term value of customers acquired through SEO.
- Recognize and evaluate indirect ROI factors, such as brand awareness.
This article was updated on November 23, 2023.