Marketing channels should make you more money than you invest in them. SEO is no different, it has to deliver a positive return on investment to sustain funding. SEO RoI is the only metric that’s important for all stakeholders of an SEO campaign – the investors and the implementers.
What is SEO RoI?
By definition, SEO RoI is the measure of how many dollars you made for every dollar invested in SEO. It is a money based approach to SEO that excludes finer metrics like organic traffic and lead conversion rate. It is the bottom line of your SEO campaign; a positive SEO RoI is a clear sign that SEO is working for you.
How to calculate SEO RoI?
To measure SEO RoI, you need to calculate how much you invest in SEO every month and how much you earn from it. You can then plug these two values into a simple mathematical formula.
SEO RoI = (Revenue from SEO – Investment in SEO) / (Investment in SEO)
You want the Revenue from SEO to be greater than your investment in SEO. For instance, if revenue from SEO is $4000 while your investment is $2000, your
SEO RoI = (4000 – 2000)/(2000) = 1 or 100%
You got a 100% return on your investment. This is an example of positive SEO Return on Investment.
However, if you made only $1000 for the $2000 you invested, your SEO RoI = -½ or -50%. This is a negative SEO RoI, which means your SEO efforts are not paying off.
This guide will help you figure out if SEO is working for you or not. We will first calculate how much money you made through SEO. There are 2 ways to do this – The Rank Projection Method and through Google Analytics.
The second method is precise, the first one is a rule of thumb.
After you know how much you earn, this guide will help you calculate how much you spent on SEO. In that section, we will cover a sundry list of expenses. If you have an in-house SEO team, we will calculate the cost of tools, backlinks, and salary of your SEO employees. If your SEO is outsourced, we will account for the amount you pay to the SEO agency or freelancers.
Once we know how much you spent on SEO and how much you made from it, we can plug the numbers into the formula and see if SEO is actually working for you.
Excited about it? So are we, let’s jump into it.
How to calculate your revenue from SEO?
A time-saving method to calculate how much you made from SEO is making an estimate based on keywords you rank for, and the traffic they attract. This is how it works.
The Rank Projection Method: Using your current ranking for calculating SEO revenue
Step1: Find the keywords you are ranking for on the first page of Google, and their monthly search volume.
Head over to Moz Keyword Explorer, plug in your domain URL, and select the country of your target audience. After that, hit the analyze button.
The tool populates the number of keywords you rank for in positions 1-10. It also generates a list of all keywords you rank for, along with monthly volume.
You can export the list to a CSV file and filter out keywords that rank you on page 2 and beyond.
Now that you have the list of keywords and the monthly search volume, you can now move to the next step..
Step 2: Estimate revenue based on rank wise traffic distribution
We all know that ranking on page 1 of Google search results guarantees a high Click Through Rate (CTR.) However, do all the 10 results get the same love? No, the pages ranking at the top get the most clicks. As we scroll lower down the SERP, CTR declines.
As per Backlinko, this is how the CTR tapers off.
This means, if you rank first for a keyword that has 1000 monthly searches, you get about 317 clicks, but if you are at the 10th position for the same keyword, you get only 31 clicks.
Now, you already have a list of keywords that get you on page 1. For each such keyword, you need to find the number of clicks your website gets. You can use this workbook for that.
Let’s walk you through each field of the workbook as we assign a hypothetical number to it.
- Average Monthly Search is the number of monthly searches for a specific keyword. Let’s assume your keyword gets 1000 searches every month.
- Ranking Position is your ranking for that keyword on Google SERP. Let’s assume your rank 1.
- New Monthly Visitors is the estimated number of visitors for that position. As per the chart, the result at rank 1 gets roughly 32% of all clicks. This field will automatically vary as you plug in your rank. In our example, for rank 1, you get 320 visitors for this keyword.
- Conversion Rate is the percentage of visitors you convert into paying clients. It depends on how well your website is optimized for conversions, and the capabilities of your sales team. At 20% conversion rate, you make 64 sales every month.
- New monthly sales is the number of sales you make every month based on your conversion rate.
- Average Sale Price is the unit price of your product or service. We assume it’s $50.
- Projected Monthly Revenue is the money you can make every month from this one keyword based on all the above fields. In our example, it’s approximately $3200.
This is what the RoI Calculations look like for our example.
Remember, this is for 1 keyword. Repeat this process for all keywords that get you on Page 1. DigiGrow’s handy RoI Calculator will save you a lot of time.
The Drawbacks of the Rank Projection Method
This method, even though quick, has a few drawbacks.
- Rank projection is based on an experiment from a source. Other sources may have different estimates. The numbers, thus, may not be accurate.
- The SERP ranking based CTR is not industry specific. The numbers are obtained from a combination of industries, so they may be slightly off for your industry.
Looking for more accurate numbers? Don’t worry, we have another method which is…
Using Google Analytics to measure SEO RoI
Google Analytics is a powerful reporting tool that can prove your SEO RoI with numbers. Here’s how you do that:
Step 1: Set-up Goals on Google Analytics
You can track your website conversions by setting-up Goals on Google Analytics (GA.)
A goal is essentially an event. Be it a purchase, a form completion or any other activity that you count as a conversion, anything can be set up as goals on GA.
For instance, lets assume that after a purchase, you direct the visitors to a thank you page. Each such visit is an event, and each event counts as a sale. You can assign a monetary value to each sale while setting a goal to track revenue, and attribute it to the right channels. For instance, if you made $10,000, GA will tell you exactly what share of that amount came from SEO.
Alright, now it’s time to set your first goal. To set a goal, log into your GA account and follow this path: Admin > View > Goals
On the first screen, click on the button – New Goal.
You can then use a template or create a custom goal.
Select the custom goal option.
In this screen, you can choose what counts as an event.
Moving on, in the Goal Details tab, you can enter the event trigger. For instance, if you chose the Thank you page as an event, you enter it’s URL. When you get a visit to this page, it triggers GA to increase the conversion count.
You can also assign a monetary value to each visit.
In the above example, the value assigned to each visit is $50. So if the Thank you page gets 100 visits, GA reports a revenue of $5,000.
Alright, now that you have set a goal, let the metrics collate for a month before you…
Track your Goals
Head over to the Conversions section of your homepage.
In this section, you will see your revenue based on the number of triggers counted by GA. You can identify how much of that revenue came through organic search by setting the source filter to Organic or Referral. Organic filter will show visits from Google SERPs while Referral filter will show the revenue earned from your backlinks.
Account for Attribution
Most online sales never happen on the first website visit. Often, people take time and multiple interactions with your business before they make a purchase.
So which channel would you attribute the sale to – The one that attracted the visitor in the first place or the one that makes the sale? GA usually attributes the sale to the last channel visitors interact with. This model is called Last Interaction Attribution.
Now, if you got the first visit through organic search but that visitor later converted through an Ad, would you attribute the sale to SEO, the Ad. or both? Make that decision before you
…head over to Multi-channel funnel settings in the Admin section of GA.
There, you can select the attribution model of choice from the list illustrated above. You can track the attribution from the Attribution section in the home screen.
Alright, now that we have calculated the revenue made from SEO, it’s time we calculate how much we invested into it.
How to calculate the cost of SEO?
SEO investment is easy to calculate when you outsource SEO to an agency. Most agencies follow a monthly retainer model. You pay them a sum every month and that’s it. That’s your SEO expenditure.
However, if you manage SEO in-house, you need to analyze your expenses.
- Investment in SEO Tools
There are many free tools available for different SEO activities. However, most organizations use an all-in-one tool for SEO. There’s a host of SaaS platforms like Moz, SEMRush, Ahrefs, etc. that centralize your SEO activities. If you use them, you need to account for their monthly costs.
In addition, you might be using more tools for features that these platforms do not offer. For instance, you may be using Grammarly for editing your blogs, or maybe you use a tool to Geotag your images for Local SEO.
Make sure you add all the costs to your tool expenses.
- Outreach Expenses
Backlinking is the key to Page 1 ranking. But getting backlinks is expensive, especially if you are a less popular website. Outreach activities like Guest-post requests and broken-link building are often met with a price tag.
Each backlink may cost you anywhere from $20 to $3000. Be sure to account for those expenses too.
- Employee Salaries
SEO is a full time job. If you have employees working on it, add their salary to the expenses. However, if employees manage SEO along with other activities, you need to calculate SEO expenses based on hours they spend on SEO.
If you pay $15 hourly and your employee spends 4 hours on SEO daily. You add $60 per day to your SEO costs.
Alright then, now you know how much you spend on SEO and how much you earn from it. Plug these two values into the SEO RoI formula and check if it is positive.
SEO RoI FAQs
Why is it Important to Measure SEO RoI?
You need to measure SEO RoI because organic search is a big chunk of total website traffic, so it also contributes a big share to your revenue. So you must know if the money you invested in that channel is actually giving a positive return. If not, you can take steps to optimize your SEO campaigns.
Furthermore, your board or investors want to know if their money is invested in a profitable venture, and your SEO team needs to be aware of what’s working and what’s not.
Challenges of Calculating SEO RoI
The biggest challenge of measuring SEO RoI is that it’s difficult to measure how much you spent on SEO and how much revenue you generated through it.
We covered in detail how to do that, but still, the process of measuring SEO RoI is not as straightforward as, say, measuring PPC RoI.
In addition, even if your future clients find you because of your SEO efforts, you may convert them only over a phone call. So, attribution is another challenge in calculating SEO RoI.
How Long Does it Take to See ROI from SEO?
It may take from 4 months to up to 1 year. It may take even longer if you are in a competitive niche. Your posts and pages may take up to 8 months to reach their highest Google ranking, and SEO starts making you money in about 8-9 months. But bear in mind, you will see positive SEO RoI after a year or even longer.
Besides competition, the quality of your content and how much time and money you invest into SEO and content marketing, also determine how fast you see positive SEO RoI.
For instance, if you write quality content that matches search intent, you may see a faster rise to the top of rankings which results in more traffic and revenue. Similarly, if you buy backlinks, you will generate more referral traffic and improve your domain authority which will speed up your SEO results. But make sure you identify bad backlinks and reject them.
When should you measure SEO’s ROI?
You should start measuring your SEO RoI when you have enough monthly traffic to generate income. This number varies as per your niche and competition. For instance, if you are in an ultra niche segment, you need very few visitors to start selling.
But if you are in a market packed with competitors, you need thousands of visitors to make a few sales. This is because each of those visitors have many options to choose from, so you get a small share of the pie.
Also, if you already have sufficient traffic, but have just set-up goals in Google Analytics, you must wait at least 1 month before you start measuring RoI. In addition, make sure you measure it over at least 6 months to arrive at an average.
What is a good SEO RoI?
If you are making as much money through SEO as you are investing, you are getting a good SEO RoI. Yes, it’s a conservative definition given that some businesses make 5x or 6x their investment, but SEO is a long term strategy, and the first win is to reach the breakeven point.
You can take it as the benchmark and build over it to 2x or even 7x RoI.
What to do when you record a negative SEO RoI?
When you get a negative SEO RoI, you know that SEO is not working for you. In that case, you need to optimize your SEO campaign and fix what’s broken. You do that by analyzing and optimizing SEO metrics that will track your campaign performance.
Achieving a positive SEO Return on Investment is a long-term goal. But, once you get there, there’s potential to see exponential growth in your traffic and revenue.
We covered a lot of ground in this post. We tried to make it comprehensive while covering every possible question regarding the topic. But if we missed out on anything, put your questions in the comment section below. Meanwhile…
Did you use the SEO RoI Calculator?