ROI (Return on Investment) is how you demonstrate the value of your SEO services in driving business growth for your clients.
It’s something that every successful agency does.
Calculating SEO ROI is simple. It involves estimating the business value of SEO activities compared to their cost.
But getting to the point where you can make that calculation is a bit more complex.
There are a lot of things you need to include.
In this guide, we’ll cover:
- What SEO ROI means
- Why it’s important
- How to measure ROI
- How to forecast ROI
What Does the ROI of SEO Mean?
SEO ROI is the value generated by SEO activities compared to the resources invested in the process.
It takes into account the growth of organic traffic, improvement in search engine rankings, and the increase in conversions.
Ultimately, an SEO strategy is judged on the impact on sales and revenue. SEO ROI is about answering the question, “What are we getting back for what we put in?”
The Importance of Measuring SEO ROI
Like any other business expense, search engine optimization needs to demonstrate a return on investment.
Evaluating the returns generated from SEO in relation to the associated costs helps businesses make informed decisions about their marketing strategy.
They can determine which strategies are delivering the best results and allocate more budget to the most effective marketing channels.
For SEO agencies working with clients, measuring SEO ROI is crucial for demonstrating the value of their services.
If you’re trying to sell SEO, speak in terms of ROI and money. Industry geekspeak doesn’t sell.
— Nathan Gotch (@nathangotch) September 2, 2021
The best way to communicate the impact of your work is through tangible metrics and positive ROI.
While bounce rates, referring domains, and indexed pages are relevant for SEOs, clients care about business outcomes.
Their primary focus is attracting more potential customers and generating more conversions.
Speaking in their language is how you build trust and prove SEO worth to your clients.
How to Measure the ROI of SEO
Even though the average business drives 53% of its traffic through organic search, measuring SEO ROI is still a mystery for many companies.
It would be great if it were as easy as marketing consultant Simon Hayward jokingly suggests.
Add up all the sales that come from the website and claim them as SEO revenue.
Divide by cost of SEO.
Sit back and marvel at great success 🥂 🍾 🍾
— Simon Howland (@simonhowland) March 3, 2022
But the reality is a bit more complicated.
Here’s how you can effectively measure the returns generated from your SEO efforts.
Calculate Your SEO Investment
First, calculate the total amount spent on your SEO campaign.
This figure will serve as your baseline when evaluating ROI.
SEO costs typically include:
This includes conducting keyword research, optimizing on-page elements, improving site speed, and enhancing user experience. Website optimization could be done in-house or outsourced.
Quality content is the fuel that drives organic traffic. You need to factor in content writing fees, graphic design services, and any tools used to streamline the process.
It takes time and effort to secure valuable links from authoritative websites. Consider the costs of outreach campaigns, guest blogging, and media placements.
Freelancers and Agencies
Include any agency fees or freelancer costs in your calculation.
This is usually an easy cost to calculate. Most SEOs operate on monthly retainers, and you’ll know how much you charge clients for your services.
You also need to include any subscription fees or one-time payments associated with the SEO tools you use to optimize and monitor your website’s performance.
Add up all these costs over a defined period. SEO takes time to generate results, so you should use a three-month period as a minimum.
Analyze Conversions Data
Next, it’s time to analyze your conversion data. You’ll need to use Google Analytics to access this information.
What counts as a conversion will depend on your business.
You’ll need to add ecommerce tracking events to your store to track conversion data.
If you haven’t already done this, Google has a helpful tutorial to guide you through the process in Tag Manager.
Once you’ve completed the setup, you can see your ecommerce conversion data in Google Analytics.
Click on ‘Reports’ in the left-hand menu, and then ‘Monetization’ and ‘Ecommerce purchases’ in the dropdown menu.
This will show your total conversion data.
You need to filter the results to see organic traffic performance.
Click ‘Add filter’ and change the Dimension field to ‘session source / medium.’
Then select ‘google / organic’ as the Dimension values.
Click ‘Apply,’ and you’ll see the conversion data for organic traffic.
This information can provide valuable insights into your ecommerce SEO performance. You can narrow in on specific products to see the conversions generated by each page.
To get a total conversion value, use the ‘Insights’ feature in the top right to search for the total revenue from organic search over the selected period.
This is the figure you’re going to use to calculate SEO ROI.
Lead Generation Conversions
If you don’t sell directly on your website, you’ll need to set up tracking based on events.
An event could be any user action that contributes to business performance. Think along the lines of newsletter opt-ins, form submissions, and click-to-call buttons.
If you haven’t set up any events on your website, Google has a tutorial to help you get started.
You can track these events in Google Analytics.
Click on ‘Reports’ and then ‘Engagement’ and ‘Events’ in the dropdown menu.
You can create new events for the conversions you want to track.
Create a name for the event and choose the ‘Parameter,’ ‘Operator,’ and ‘Value.’
Once you’ve created the event, you should see it listed in the ‘Existing events’ section on the previous page.
Now you need to toggle the ‘Mark as conversion’ switch for your event.
This will make your event appear in the ‘Conversions’ tab and allow you to assign a dollar value.
Assigning an estimated value to each conversion in your Analytics is essential for SEO ROI.
The exact amount will depend on the type of conversion and the business.
For example, a user filling out an inquiry form for a finance firm will have much more value than a newsletter opt-in for an affiliate review website.
Once you’ve assigned a value to each conversion event, you can use the ‘Insights’ feature to see the total revenue generated by organic search traffic.
Calculate Your Return on Investment
Now you have your total expenses and conversions value – it’s time to crunch the numbers.
Here’s the formula for SEO ROI:
SEO ROI = (conversions value – SEO costs) / SEO costs
Let’s take a look at an example.
Your SEO tactics generated $20,000 in conversion value. The total amount spent on SEO in the period was $5,000.
$20,000 (conversions value) – $5,000 (SEO costs) / $5,000 = 3
If you multiply 3 x 100, you get a percentage ROI of 300%.
So for every $1 your client spent on your SEO services, they generated $3 in return.
That’s how you calculate SEO ROI.
How to Forecast SEO ROI
We’ve covered how to measure the ROI of an SEO campaign.
But if you’ve worked with clients before, you’ll know the importance of being able to forecast potential revenue growth.
Clients want to know what they can expect to achieve. Providing an accurate forecast can help you set clear expectations.
Here’s how you can forecast SEO ROI.
Determine Your Average Click Through Rate
We’re going to assume you already know the keywords you want to target.
If you don’t, you can use FATJOE’s keyword research service and recommendations on which relevant keywords to target for the fastest results.
Step one is determining the average click-through rate (CTR) by position on the search engine results page (SERP).
How high do you need to rank to generate significant organic traffic?
The higher the CTR, the more chances you have to convert visitors into customers.
You can use average CTR data like the following study by Backlinko:
However, there are a bunch of variables that can impact the CTR of a SERP. It isn’t easy to get an accurate CTR prediction.
You can use your existing Google Search Console data to get a rough estimate based on the keywords you currently rank for.
Find Your Average Conversion Rate
Next, you need to identify the conversion rate (CR) for your tracked events in Google Analytics.
That could be ecommerce sales or lead generation conversions.
Ecommerce sites typically achieve a higher conversion rate than other websites, with an average of 1-4% click-throughs converting into sales.
It’s best to use an average conversion rate over 3+ months. This broader data set gives you a more accurate forecast of organic conversions.
Remember, you’re only using the conversion rate for your organic search traffic.
Identify the Value of a Conversion
Now it’s time to assign a dollar value to each conversion. This allows you to quantify the financial impact of your SEO efforts.
It’s easy for ecommerce stores.
For example, if an online sale generates $20 on average, and you’ve had 100 conversions, that’s $2,000 generated from SEO-driven sales.
But it’s more challenging for businesses not selling directly from their website. You’ll need to estimate the value of a lead, email subscriber, or phone call.
Estimate Traffic and Revenue Based on Search Volume
You also need to estimate traffic based on the search volume of your target keywords.
Keyword research tools can show the search volume for different keywords and phrases.
Combining this information with conversion rates, CTRs, and the average value of each conversion, you can estimate the potential traffic and revenue that your optimized pages can generate.
Here’s the formula:
Search volume x CTR x CR x conversions value = estimated monthly SEO revenue
Calculate Estimated SEO ROI + Example
With your monthly SEO revenue estimate and total SEO costs, you can forecast the ROI of an SEO campaign.
Estimated monthly SEO revenue – SEO costs / SEO costs
Here’s an example.
Let’s say that you have a client that sells outdoor rocking chairs.
The search volume for the keyword’ outdoor rocking chair’ is 22.2k.
It’s a competitive keyword, but you’re confident you can claim an average ranking of 5 in the SERP.
Using Search Console data and third-party estimates, you predict a CTR of 6%.
With these two metrics, you can estimate how much organic traffic you expect to generate.
(Monthly search volume) 22,200 x .06 (CTR) = 1,332 estimated organic traffic
The client sells each rocking chair for $100.
Looking at the historical average conversion rate for the product page, you can estimate an organic search CR of 3%.
So if you can drive 1,332 organic visitors to the page, you can calculate how many sales you will generate.
(Organic visitors) 1,332 x .03 (CR) = 39.96 sales per month.
With each sale generating $100, the SEO campaign will drive $3,996 in monthly sales revenue.
Over a three-month campaign, you can estimate a total of $11,988 in SEO-driven sales.
Let’s say it costs an initial $1,000 to optimize the page and build enough links to rank. And there is an ongoing cost of $500 per month to keep the page ranking.
So over a three-month campaign, the total investment cost is $2,000.
You can use the SEO ROI formula to forecast the ROI of the campaign.
(Conversions value) $11,988 – $2,000 (SEO costs) / $2,000 = 4.99
If you multiply 4.99 x 100, you get a percentage ROI of 499%.
So for every $1 your client spends on SEO, they can expect to generate $4.99 in sales.
The Cumulative Impact of SEO
One of the biggest advantages of SEO is its long-term impact.
Unlike short-lived ad campaigns, SEO gets more effective over time.
As the website’s topical authority and visibility in search engine rankings improve, it attracts more organic traffic.
That means more opportunities for conversions and sales.
The lifecycle of a blog post optimized for search:
2021: 1,500 monthly organic visits
2022: 1,800 monthly organic visits
2023: 3,200 monthly organic visits
2024: 7,000 monthly organic visits
2025: 15,000 monthly organic visits
That’s over 250,000 people.
That’s the ROI of SEO.
— Ross Simmonds (@TheCoolestCool) August 21, 2021
Driving Agency Growth with SEO ROI
Measuring and demonstrating ROI is a must-do for any SEO agency. It’s how you keep your clients happy and justify SEO investment.
And it can drive business growth for your agency too. You can showcase the value of your services and attract new clients.
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