Return on Investment or ROI, is a common acronym used in almost every business scene. It measures the profit or revenue generated from a particular business spending. ROI is essentially the measure of profitability as it helps business owners determine what works and what doesn’t. See more here.
In the Search Engine Optimization (SEO) world, ROI is just as important. Businesses and brands want to know what they are getting from their SEO and digital marketing investments. As an agency owner or business, this article explains the ROI of SEO and how you can measure it for decision-making.
What is the ROI of SEO?
ROI measures the returns you enjoy from your investment in any activity. In SEO terms, it measures the returns or outcomes generated in SEO activities.
The ROI of SEO is the relationship between the amount you’ve invested in SEO and the output, in the form of traffic, leads, revenue, and profits. It is important to note that this ROI may vary depending on the specific goals set by the client or the SEO agency.
The ROI of SEO can also be different across the board and can change periodically, depending on what is being targeted. Ultimately, this ROI measures the results of efforts put into SEO activities.
Why Measure SEO ROI?
SEO ROI or ROI of SEO means the same thing. It measures the results generated from an investment in any SEO activity.
Measuring SEO ROI is important because most businesses generate about 53% of their search traffic from the internet through organic searches. In addition, most consumers conduct organic searches to make purchasing decisions.
Calculating the results of your SEO activities will help you understand whether your strategies are failing, where it is failing, and how to revamp it – if needed.
This metric can also help you determine whether to abandon specific activities that aren’t in line with your audience’s actions.
Formula for calculating the ROI of SEO
Measuring your SEO ROI is pretty simple. The formula is similar to calculating ROI for any other online or offline investment.
The trick is to weigh your investment costs against the output or profit.
SEO ROI = (Conversion or outcome values – Investment costs) / Investment cost
How to measure the ROI of SEO
Using the formula above, you can calculate your SEO ROI in simple steps. However, the key elements to input into your formula are;
Your SEO Investment
Your SEO investment or investment cost is the summation of the amount that has gone into the SEO activities being measured. Some of the typical costs you should consider under this include;
In-house SEO Resources
This often involves the cost of employees working in-house in your SEO department. Some roles that add up include SEO Managers, Content Managers, Copywriters, developers, email marketing specialists, etc.
You may need to consider this cost in terms of its hourly or daily rate throughout the campaign’s duration. Doing this helps you avoid overestimating the costs, which can ultimately affect the ROI calculation.
Freelancers and/or agencies
Sometimes you may need help from freelancers or agencies to handle certain aspects of your SEO campaign. Usually, this cost is easier to track, especially if you’ve hired a new freelancer or agency specifically for the campaign’s lifetime.
Failing to include this cost in your investment estimate can give a false representation of your ROI.
SEO relies on a variety of tools, most of which are paid. These tools could be for research, optimization, tracking, conversions, or others. The cost of tools purchased for your in-house team should be factored into the investments made.
Track and Analyze Conversions
With your investment costs calculated, the next step is to track and analyze your conversion or results generated from the SEO campaign.
This analysis can be done in various ways, depending on the specific goals of your SEO campaign. You can start by visiting your Google Analytics or any similar analytics tool set up for results measurement. Most tools can allow you to export data over a period, which makes it easier to track your success within the campaign’s timeline.
If running multiple campaigns, you can isolate each campaign and compare their results before or after exporting your data.
Common metrics to focus on include;
- Ecommerce conversion values
- Lead generation conversion values
- Customer lifetime value (LTV) x lead conversion rate
Calculate your ROI
With your inputs ready to go, you can now calculate your ROI by slotting the values calculated in steps 1 & 2 into the formula.
For example, if your investment cost is $4,000 and your total revenue is $20,000, then the calculation would be;
($20,000 – $4,000) / $4,000 = 4
This means that you gain $4 for every $1 invested in your SEO campaign. Essentially a 400% ROI.
It is important to note that SEO ROI can be positive or negative. A positive value indicates profit, while a negative value indicates losses.