Have you been paying attention to the SEO on your website for some time? If so, you must learn about calculating SEO ROI.
Well, it has been long-established that, unlike many other marketing tools, Search Engine Optimisation can be quite unpredictable. This includes the inability to tell if a particular campaign will work or determine the returns expected from others.
And even though you might not have tangible information, it’s still important to calculate return on investment (ROI). It lets you know the success rate of your current projects, and you can make the necessary tweaks to get your expected returns.
However, on asking different people who work with SEO regularly, we found that most don’t know how to calculate your SEO ROI correctly. Therefore, we came up with this handy guide to make the calculations less complicated and easy to undertake for anyone checking the performance of SEO projects.
So, without further ado, let’s get started!
Why Should You Calculate The ROI Of SEO?
If you have been involved in digital marketing for a while, you already know that search engine optimisation or SEO is one of the most helpful tools in the industry. Considering how unpredictable the process can be, calculating your ROI becomes essential to have tangible data to check how your marketing budget is performing.
That said, measuring ROI helps you assess the progress of an SEO campaign and the goal value that you might achieve, whilst also ensuring your marketing strategy as a whole is effective. If you are planning to work with a digital marketing agency, investing in SEO can be done based on their estimated ROI or your expected ROI.
In simple terms, the foremost reason to calculate the ROI of SEO is to understand whether the cost of investment is bringing in proportionate gain.
Calculating the investment and profits can be pretty easy in the case of online marketing tools like Google Ads. But, things get a bit tricky when it comes to organic search traffic.
Google Ads and SEO are very different, and they are two different marketing channels, both worth investing in, but the ROI calculation is handled differently.
Similarly, the monetary gains from a well-made SEO campaign are secondary to the organic traffic it brings for you. This is especially true for eCommerce websites, where SEO plays a vital role in maintaining a brand presence on search engines.
The need to calculate the ROI of your SEO is even more important if you run a digital marketing agency or have a new business. Additionally, the ROI outcomes of your SEO efforts or the ROI projects can make you look more presentable in front of stakeholders and investors.
A drive towards positive ROI, especially in the case of organic traffic, brings hope for a successful SEO campaign. It’s also important to remember that as the parameters of SEO keeps changing, the way to measure the ROI of SEO may also alter.
Challenges Of Calculating The ROI Of Your SEO
Before discussing how to calculate the return of investment or ROI for your SEO strategies, let’s focus on the challenges. Yes, unlike measuring the investment or gains made from pay-per-click or PPC ads, calculating organic traffic outcomes may be a bit more complicated.
One of the main reasons is that there’s seldom any fixed cost associated with SEO. You might be paying for digital marketing or content marketing, but they aren’t reflected in the organic traffic the SEO campaign pushes. Similarly, in the case of PPC ads, you can easily track the periodic investments and the gains, which isn’t possible with SEO.
A good SEO campaign may reward you with organic clicks on your website rather than coming up as revenue gains. And that’s why you should know about the key performance metrics or KPIs that play an essential role in determining the ROI.
We know that things may sound a bit confusing at this point, but don’t worry; we will take you through the nitty-gritty. So, read on to see how your SEO campaigns have been doing.
How Can You Calculate The ROI Of SEO?
First, let us talk a bit about return on investment or ROI. Two primary parameters can help you determine the ROI of any business or marketing investment. They are:
- The amount spent on implementing the SEO — Cost of investment
- The amount you earned due to the implementation of the SEO — Gain from investment
If you’re struggling to calculate your own ROI, consider using an SEO ROI Calculator.
1. Different Costs Needed For Implementing SEO
The amount you spend or invest in SEO will depend on many factors, including the goal of a campaign. If you are a beginner just starting implementing SEO on a website, the cost might be nil. However, the most common costs that a business or individual may need for SEO include:
A. Cost Of An SEO Agency
Most people may think that implementing SEO does not require outside input, but that belief is inaccurate. A lot of research is needed for planning a proper SEO campaign, which often requires sourcing for links and undertaking off-page SEO.
One of the good things about hiring a digital marketing agency is that they will most likely give you a cost estimate for all the work. And you will probably end up paying the agency a monthly fee. So, counting this in your investments won’t be a problem, and you will also end up saving the cost needed for apps or tech.
B. Cost For In-House SEO
As you may know, SEO is much more than just adding links to a web page. So, it’s typical for a business to require SEO efforts from others, like developers and copywriters dedicated to the work. As these employees will work under you, you decide to pay them hourly or daily.
Therefore, while calculating your total investment for implementing the SEO, you will need to consider their salary. To avoid missing out on any cost, make sure to track the rates and work done as closely as possible.
C. Cost Of Technology
While checking out the different aspects of investment cost in SEO, we found out that people often miss out on considering the cost of tools. In the case of SEO, you will most likely use different tools for optimising your content or keyword research.
And these pieces of software generally charge you on a monthly or yearly basis. Therefore, look into the apps or software you or your team are currently using and include it in the overall SEO investment cost. This is also an excellent time to eliminate or unsubscribe from any software you might not use to avoid unnecessary expenditures.
After going through the different costs you or your company incur, add them up for the total investment cost. At the same time, you should note that the costs may vary every month based on the amount of work you put into SEO efforts. And, that’s fine; make sure to account for the changing costs while evaluating the SEO efforts.
2. Tracking And Analysing Conversions
By now, you must have calculated and compiled the total cost of investment for implementing SEO. Even though we will need some formulas, they will be daunting as you only need to track and measure the estimated value generated by conversion.
One of the first steps to calculate the ROI of your SEO would be to set up tracking and analytics of the job that’s being done. And, no one will help you more in this step than Google, irrespective of what other SEO tools you may use.
It’s a must for any company or individual to find their time to set up Google Analytics to get a snapshot of their plan. If you are looking forward to getting into the depths of conversion tracking and organic search, Google Analytics data will be your best friend.
A. Tracking eCommerce Conversion Values
The first thing to do in the case of using SEO for eCommerce is to set up the eCommerce tracking in Google Analytics. All you need to do is log into your Analytics account and find your way to the “Admin” section and then click on “View” for “Ecommerce Setup” settings.
To set the eCommerce tracking, turn on the “Enable Ecommerce” and “Enable Enhanced Ecommerce Reporting” buttons. Additionally, the help section of Google Analytics has information on tracking-code setup, which you might need to enable the buttons.
And, if you aren’t the one who is used to deriving reports from Google Analytics, have a chat with your developer to do it. Nevertheless, setting up the eCommerce reporting button gives you access to the eCommerce reports found on the “Conversions” tab when in the Analytics mode.
Several data sections are visible in this report section, including one which checks the organic traffic coming towards your website. You can even check the conversion rate of your organic search traffic. However, the indispensable feature of this section has to be the revenue reports that can help you find the SEO ROI for your site.
B. Tracking Lead Generation Conversions Values
On the other hand, if your website or business is reliant primarily on conversions in the form of leads, then things might be a bit complicated. That’s why most SEO firms prefer to keep Google Analytics experts and developers who know their way around the tracking system.
One of the things that’s different about tracking leads is that it lacks the conversion rate seen in the case of eCommerce. As most people decide to associate with your businesses offline, there’s no way to tell that every lead will turn into a customer.
However, to make the process easier, head on the “Admin” section of Google Analytics and then click on “View”, to finally enter the “Goals” section. As you can understand, we will take this opportunity to set up a new goal based on our expectations from conversions.
To set a new goal, you can either choose one from the templates, set up a smart goal, or create a custom one from scratch. For the custom goal, select the “Custom” option, assign the “Goal Description”, and proceed to fill in all the “Goal Details.”
This is where you will get the “Value” section, where you must enter the monetary expectations from the SEO. It will help you calculate the ROI of your SEO, primarily based on the average value of a generated lead. In eCommerce, this is referred to as your average order value or average lifetime value and can be worked out using the average dollar value of each sale.
How To Get The Value?
Even though we would like to assign an expected monetary value on our own, it won’t lead us to the right calculations. Hence, the most effective way to figure out the way is by using the formula:
Customer Lifetime Value (LTV) x Lead Conversion Rate
Customer LTV is a fascinating value, as it’s the average amount a customer spends on your website or business over a lifetime. And the lead conversion rate is the percentage of the leads gathered on your website that turns into paying customers or sales.
For instance, if your Customer LTV is AU$30,000 with a lead conversion rate of 15%, the assigned goal value should be AU$4,500.
As you can understand, this might not be the most accurate business or website metric. But, it helps to arrive at an acceptable value to calculate the ROI for your SEO when the business is based on leads conversions.
Anyhow, you can check the value brought by the organic leads by visiting the “Overview” section in the “Goals” panel. Once there, set the filter to “Organic traffic” and search for “Goal Value.”
So, by this stage, you have the cost of your investment for doing the SEO work and the revenue generated after implementation. We will feed these values into a relevant formula to calculate your ROI for the SEO strategy.
3. Calculate Your Return On SEO Investment Cost
As you now have all the required data, it’s time to put in the respective values to calculate the ROI for your SEO. This is the formula we will use to get the ROI:
(Value of Conversions – Cost of Investment) / Cost of Investment
Let’s see how it works with the help of a simple example. First, we will assume that your SEO strategy has generated a monetary value of around AU$400,000, while the cost of investment is AUS$50,000.
Feeding the values into the formula, we get (AU$400,000 – AUS$50,000) / AUS$50,000 = 7
So, your SEO ROI for every AU$1 spent is approximately AU$7. In other words, you have had an ROI of 700% over time if we multiply the ROI value by 100. Similarly, you can use the formula to calculate your ROI from SEO irrespective of the time duration that’s being considered. Just make sure that the other values are correct to get the most accurate costs and returns.
While finding the right SEO ROI, we realised that most businesses have a multi-channel approach for lead generation. Hence, when a lead is finally turning into a customer, they can arrive from an organic search or even through a PPC ad.
When we checked Google Analytics, it showed Last Non-Direct Click conversions as the default conversions attributed for calculations. So, what it ends up doing is calculating the value by only taking into account the last channel used by a visitor to your site. But, in reality, most visitors have multiple interactions with a website before converting into a customer.
There’s no need to worry, as you can fix the default setting by going to the “Conversions” section. Here, you can select the “Multi-Channel Funnels” option and then the “Assisted Conversions” option to get a detailed view of the different values.
Note that when using the “Assisted Conversions” option, both your SEO team and PPC team should use the same settings on Google Analytics. This would help to avoid reporting inaccuracies and miscalculations.
Measuring Your Return On Investment
That’s everything we had to tell you about calculating the ROI of your SEO. We understand that some parts may sound a bit confusing if you’re new to it. But, we can assure you that the process gets much easier once you start doing the calculations regularly.
Additionally, we highly recommend you learn your way around Google Analytics if you haven’t done so already. Knowing the tools would help you check the return on investment or ROI using the values and to recheck the calculations done by others.
With that, we have come to the end of this guide. We hope that our guide and tips will help you calculate ROI from SEO without much trouble. Get in touch with our team if you need assistance with any of the above topics. The team at sitecentre can provide you with expert advice and assistance.