With the continued rise of AI and ChatGPT, constant algorithm updates, and the never-ending goal of beating the competition, understanding the ROI (return on investment) of SEO has arguably never been more important.
How do you know if your SEO is effective? How can you determine if it’s going to create positive ROI? Is it even possible to forecast like other marketing channels?
These are critical questions to ask and answer. Let’s dive in!
What is the ROI of SEO?
Return on Investment (ROI) is the monetary gain you receive from investing in Search Engine Optimization (SEO). The goal of SEO — and all marketing efforts for that matter — is to earn you (or your client) more money than what you spend.
When you receive more website traffic, conversions, and ultimately leads and sales from your SEO efforts, that’s the positive return coming into effect.
While SEO is very effective, and arguably the most effective digital marketing channel long term, it’s complicated to understand — especially when calculating SEO ROI or forecasting potential ROI.
So can it be done? Yes, but it can be a bit cumbersome at times.
Why It’s Important To Determine the ROI of SEO
Like any other business investment, it’s crucial to determine the impact of your SEO campaigns. Understanding the effect is key to making the most of your SEO efforts. If left in the wrong hands, SEO can become nothing more than an expensive housekeeping service for your website.
But when in the right hands, a thorough SEO strategy can be a powerful tool that sets you (or your client) up as an authority in the industry and attracts invaluable, converting website traffic. Being cognizant of the cost and conversions stemming from SEO helps you better understand the impact SEO is having.
How To Calculate The ROI Of SEO
Calculating the ROI of SEO for Ecommerce sites is different from lead generation sites. No matter what kind of business you operate, this process starts with conversion tracking and a solid look at your Google Analytics account, so have that handy before moving on.
Identify Your SEO Expenditures
First, you need to identify your SEO expenditures. If you hired a freelancer or an agency to do your SEO for you, this is simple. Your SEO cost is the price you pay the freelancer/agency each month.
If you’re doing SEO in-house, you need to take all of the following into consideration:
- Software/tools: Whether it be cloud-based or downloaded on your computer, every successful SEO needs their tools. Moz, Semrush, Surfer, Screaming Frog, ContentKing…the list goes on and on.
- Content Production: If you have a copywriter in-house, calculate the time (and cost) it takes them to write each article. If you outsource, how much do you pay for your content?
- Editing and Plagiarism: Do you use Grammarly or Hemmingway to edit your articles? How about running through CopyScape to check for plagiarism? These may be small costs, but they all add up.
- Graphics: If you use graphic or image software like Canva, Adobe, or iStock, you’ll want to account for these.
- Misc: There are other SEO-related costs that can come up (speed optimizations, citation building, etc.), so make sure you track them all to make your ROI calculations as accurate as possible.
Set Up Conversions for Ecommerce Sites
The first thing you need to do for your Ecommerce site is set up conversions in Google Analytics. This allows you to capture the conversions occurring on your site. Once Ecommerce tracking is set up, you can see the overview of your sales data by going to the Conversions tab on the left navigation panel, then Ecommerce, then Overview if you still have Universal Analytics.
This is what that looks like:
Remember, Google is putting Universal Analytics to rest for good, so switch to GA4 as soon as possible if you have not done so.
If you are using GA4, then you would go to Reports, then Monetization, and finally Ecommerce purchases. Below is an example of Google’s online store. The chart and data will automatically sort by items viewed, largest to smallest, but you can select items purchased to see the items that have been purchased the most for the time frame.
Now, in GA4, click on the plus sign at the top next to “Item name” to add a filter, and filter to include Session source/medium. Then click google/organic (click apply) to see conversions coming from organic search or at least partially attributed to organic search.
Set Up Conversions for Lead Generation Sites
If you don’t sell items directly on your site, it can be a bit more challenging to know how much money comes from your site. The first step you need to do is create events in your Google Analytics account and then mark them as conversions. You also need to assign a value to each conversion. Here’s how you do that:
- Identify your top conversion events (form submission, “call us today” button, “get a free quote” button, etc.)
- Count how many of those conversion events/leads become paying customers
- Calculate the average amount of money your customers spend
- Divide the total revenue by the total number of conversions to get a value per conversion.
For example, let’s say 100 people clicked on your “call us today” button in a given month. If you have that selected as a converting event, you get 100 conversions.
Of those 100 people that clicked, 10 became customers and spent $6000 collectively. That means on average, each “call us today” conversion was worth $60 ($6000 total revenue/ 100 conversions).
Now you can mark the “call us today” button with a $60 value. Repeat this process for the other conversions. When you’re done, you’ll have a nice list of conversions set.
If you don’t know how many conversions you get from each event (and thus can’t calculate the value of each conversion type), you’ll have to gather data for a couple months.
From this point on, you’ll be able to see how many conversions were attributed to organic search by going to the Advertising tab.
Calculate Your ROI!
Once you have all of the above information at your fingertips, it’s time to calculate! This is by far the easiest step. Here’s how you calculate your ROI:
SEO ROI = (Revenue From Organic Conversions – Cost of SEO Investment) / Cost of SEO Investment
Time for another hypothetical. Let’s say your revenue from organic conversions in one quarter was $80K and you spent $15K on SEO services. This would be your calculation:
($80K – $15K) / $15K = 4.33
Multiple 4.33 by 100 to get your percent, and your ROI from your SEO for that quarter was 433%. Not bad at all!
How To Forecast Potential ROI from SEO
Perhaps you are not investing in SEO at the moment (you probably should though) and you’re curious about what the potential ROI could be. Or, you need to calculate it for a potential client, here’s how you would go about forecasting potential ROI.
Disclaimer: This is a forecast, not a guarantee. Since there are many moving parts to the equation, the final ROI can be different from what you calculate.
Identify the Keyword Search Volume
The first step is to go to your favorite SEO tool (like Semrush) and look at the search volume for your target keyword. If you wanted to rank for “San Francisco SEO Company,” you’d plug that into Semrush and see that it is searched about 210 times per month.
Now, multiply that number by 0.276 because that’s the average click-through rate (CTR) of the number one organic ranking position in Google. That gives us 58 (rounding up).
That means if you rank #1 for that keyword on Google, you can assume you’ll get about 58 people coming to your website from that term each month.
Multiply 58 by your average conversion rate for all of your conversion events. Remember those from earlier? To get your average conversion rate, divide the number of paying customers by the number of leads/converting events.
Using the lead generation example from earlier, if 100 people total clicked on a converting event (form submission, “call us today” button, “get a free quote” button, etc.) in one month and 7 of those became paying customers, your conversation rate is 7% (7/100 = 0.07 x 100 = 7%).
If we multiply 58 (the number of monthly assumed visitors from the keyword “San Francisco SEO Company,”) by .07 or 7% (your average website conversion rate) you get 4.06. This is the average number of MONTHLY purchasers you can expect to gain from ranking #1 on Google.
Finally, multiply 4 (round down to the whole number) by your average order value (AOV) to get the potential income from that keyword on a monthly basis. For instance, if your average customer spends $5K monthly (not too bad for an SEO company) then your potential monthly revenue if you rank #1 for “San Francisco SEO Company” is about $20K (4 x $5K).
Annually that would be over $243,000 from a single keyword. Now do you see why SEO is so valuable?
Need Help With SEO?
If you need help with your SEO — as a business owner or an agency — shoot us a message. Whether you’re an Ecommerce business or a lead generation business, we can help you (or your client) gain visibility in the SERPs and take advantage of the compounding power of SEO.
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