How to Measure the ROI of SEO (original) (raw)
Measuring SEO’s return on investment puts the impact of SEO into perspective. For example, you can show company leaders how SEO has generated traffic, leads, and sales, which can lead to continued investment in this strategy.
Want to know how to calculate SEO ROI? Keep reading to break down the following topics:
- What is SEO ROI?
- Why measure SEO ROI?
- How to measure SEO ROI
- User purchase journey: An alternative to measuring ROI SEO
- Challenges to SEO ROI
- FAQs about measuring ROI for SEO
For professional help improving your ROI, contact us online or call 888-601-5359 to learn more about our SEO plans!
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What is SEO ROI?
SEO ROI is a calculation that measures the return on investment of search engine optimization. Companies can calculate SEO’s return on investment by looking at search engine rankings, organic website traffic, and goal completions, and then using the ROI SEO formula: (Gain from Investment – Cost of Investment) / Cost of Investment.
Understanding where your budget goes helps you save money on effective strategies. If you want to see how SEO impacts your business, calculating SEO ROI is necessary.
The primary benefits of finding SEO return on investment include the following:
- Convincing company leaders: When trying to prove the importance of SEO to decision-makers, you need data. Finding the ROI of your SEO efforts can prove your success in dollar amounts to encourage them to keep investing.
- Making SEO decisions: You can use SEO ROI to determine what channels and pages bring in the most revenue for the company. As you learn where your revenue comes from, you can continue investing in the appropriate tactics.
- Measuring success: Since SEO is an ongoing process, it can take time to measure success. ROI will show your company’s wins and help you make the most of your budget over time.
With all these benefits, it’s clear that SEO ROI is crucial to your company’s standing.
How to measure SEO ROI
To calculate SEO ROI, you can follow these steps:
- Calculate your investment
- Set up conversion tracking
- Calculate your SEO ROI
Let’s break down each one below.
1. Calculate your investment
To get started with SEO ROI, you must first calculate how much you are investing in SEO. From there, you can start measuring the income generated from your investments.
Your investments should include the following:
- In-house employees
- SEO agencies and freelancers
- Any SEO tools
- Content distribution and link-building payments
2. Set up conversion tracking
The next step in determining your ROI from SEO is setting up conversion tracking in Google Analytics (GA4). This step allows you to track all the conversions on your site that earn revenue. The setup you use depends on whether you make sales directly on your site or not.
Ecommerce stores can use ecommerce tracking to pull data from their online transactions and measure their exact online revenue. This tracking capability means the data for online returns is extremely accurate.
Lead-based businesses, like service providers, can set up conversion goals like lead form submissions and assign dollar values to those goals based on customer data.
Here’s how both types of businesses can set up conversion tracking on their sites:
Ecommerce events
The best way to track revenue from an ecommerce store is to set up ecommerce tracking events using Google’s instructions. This process will help you capture ecommerce data and send it straight to GA4 for analysis.
Once you start tracking ecommerce events, you can access an ecommerce report (Reports > Monetization > Ecommerce purchases) with all the information related to your online sales.
From there, add a filter for organic traffic.
To get your total value of conversions, you must click on the insights button at the top right:
This report is useful for measuring your site’s overall success and monitoring your performance. So even if you aren’t planning to calculate your ROI from SEO immediately, we recommend setting up ecommerce tracking as soon as possible.
The sooner you start collecting data, the more you’ll have to work with when you decide to start digging into Analytics more.
Lead generation events
If you don’t make sales directly on your site, getting exact data on how much revenue you generate is a little more difficult. The most accurate estimate comes from assigning dollar values to each of your on-site conversions based on past sales data.
Navigate to Admin > Events to create goals for each of your on-site conversions:
Then, create an event for each of your conversions. These goals can range from contact form submissions, free quote requests, and even phone calls if you have call tracking set up on your site:
First, name your event, and add a “Parameter,” “Operator,” and “Value.” Then, once you add the event, you can mark it as a conversion:
Then, enter an estimated value for each of these conversions in the “Parameter configuration” section. These values won’t be exact, but if you have some analytics data to pull from, you can get a pretty accurate estimate.
Here’s how to find out what your listed value should be for each event:
- Determine how many of the leads convert into sales. For example, if you get 100 lead forms per month and 25 of those leads become customers, that goal has a 25% conversion rate.
- Determine the average value of each sale. If each of the leads that convert spends 200,youraveragevalueis200, your average value is 200,youraveragevalueis200.
- Determine the value of each lead. Determine the value of each lead by dividing the total value of conversions by your original number of leads. Using the values above, if you earn 25 customers and they each spend 200,youmake200, you make 200,youmake5,000. Divide that 5,000byyouroriginal100leads,andeachleadfromthisgoalisworth5,000 by your original 100 leads, and each lead from this goal is worth 5,000byyouroriginal100leads,andeachleadfromthisgoalisworth50 on average.
Follow this formula for each goal and enter the corresponding values before moving on to the next step.
3. Calculate your SEO ROI
One you’ve determined how much revenue your SEO strategy generated during a specific time (typically a month or a quarter), you can compare that amount to your SEO investment to determine your ROI.
Most businesses use the following formula to calculate SEO’s ROI:
- (Gain from Investment – Cost of Investment) / Cost of Investment
If your company already has a method for measuring the ROI of your other marketing channels, you can use the same formula to compare SEO against them.
For example, some companies calculate ROI using the net profit from each sale instead of the total revenue. Use those same values for your SEO strategy, or your comparison will be skewed.
If you don’t have an existing method for calculating your marketing ROI, you can use the basic Investopedia formula (Gain from Investment – Cost of Investment) / Cost of Investment. Then, multiply the resulting number by 100 to get your ROI in percentage.
Using the data below, here is the SEO ROI formula in action:
Gain from Investment: $704,087.50
Cost of Investment: $10,000
(Gain from Investment – Cost of Investment) / Cost of Investment
(704,087.50 – 10,000) / 10,000
60,087.50 / 10,000
6.00875 *100
600.875%
The company’s return on investment from SEO is more than 600% — that’s massive!
User purchase journey: An alternative to measuring ROI SEO
If you want another way to track your ROI, the user purchase journey report (Reports > Monetization > User purchase journey) considers all the steps that lead to conversion.
But instead of showing each channel’s separate contributions, it shows the common paths your users take to converting:
This report is helpful because it gives you a better idea of how your customers interact with your site and other channels before purchasing or becoming a lead. The more you understand your customers, the more effectively you can structure your campaigns moving forward.
Challenges to SEO ROI
While calculating SEO ROI is necessary to understand your business investments, it is not without challenges. Here are a few common issues companies run into when they try to calculate the ROI:
- SEO takes time to work: SEO is an ongoing process, and you often won’t see any results from your changes until four to six months after you implement them. The rolling timeline can affect the overall ROI.
- Gaps exist between investment and return periods: Looking at overall returns can be challenging since SEO is not time specific. Instead of looking at monthly or quarterly returns, checking for individual pages and keywords can be better.
- Retention impact is hard to measure: SEO can increase customer lifetime value, helping you build long-lasting relationships and lower churn rates. This benefit is nearly impossible to track when calculating SEO ROI.
With all that said, understanding your SEO ROI can help you make the right choices with your marketing budget. As you learn how SEO impacts your profit and generates leads in unqualifiable ways, you can better prioritize the aspects that are most likely to earn revenue.
FAQs about measuring ROI for SEO
Do you have additional questions about measuring ROI for SEO? Browse our FAQ!
When should I measure SEO’s ROI?
Generally, you’ll measure SEO’s ROI monthly, quarterly, and yearly. Since SEO is a long-term strategy and takes time to generate results, you probably won’t see a positive ROI in the first three to six months. After this initial period, SEO can start delivering a return — and continue providing one.
How do I measure SEO’s ROI?
Measure SEO’s ROI with the following formula:
- (Gain from Investment – Cost of Investment) / Cost of Investment
Calculate your expenses for investing in SEO to get your “Cost of Investment,” and then reference your Google Analytics data to get your “Gain from Investment.” Substitute your numbers in the formula, and you’ll get your ROI from SEO.
What is a good SEO ROI?
A good SEO ROI depends on your business.
Every company is different, which makes assigning an average or good SEO ROI difficult. While one business invests 1500monthlyinSEO,anotherspends1500 monthly in SEO, another spends 1500monthlyinSEO,anotherspends3000. Not to mention, lead values vary from company to company.
Before you start optimizing your site for SEO, think about brainstorming an ideal ROI for your business. This number can be a benchmark for your team or agency to measure against itself. For the best results, start with a small percentage and then work towards a larger one as you gain data.
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A well-structured SEO strategy can produce impressive ROI for businesses in all industries – and if yours isn’t where you’d like it to be, WebFX can help.
We focus on ROI right from the start and create custom strategies for each of our clients to provide the best returns possible. For more information about our organic SEO services, contact us today and get a free quote!