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SEO ROI formula and SEO ROI calculator

SEO checklist part 12: SEO ROI

SEO ROI

SEO and ROI – nothing polarizes digital marketers more. Let’s face it, marketing budget decisions are often made based on a channel’s expected ROI, or return on investment. And that’s a good thing.

ROI can be a marketer’s best friend because it can quantify the value of your activities, even creative work. Unfortunately for digital marketers and search specialists, SEO budgets can be pushed aside because decision makers don’t believe that outcomes can be as reliably predicted and measured as other channels. In fact, a 2015 study by Hotwire found that 79% of senior-level marketers don’t include SEO in their budgets at all.

“It’s 2016 but we’re still acting like it’s 1995”

If the powers that be don’t see the value in a marketing channel, it’s because they haven’t seen evidence to suggest otherwise. The burden of proof is on digital marketers. We need to do a better job of quantifying the value of search engine marketing to clients, bosses and the general marketing community at large.

Here are the two biggest SEO budgeting hurdles:

  1. Search engine optimization is a marathon, not a sprint. Accurate SEO ROI can’t be calculated in weeks, or even months. SEO is a long-term investment that can take years to pay off.
  2. Compared to paid search and some other online marketing channels, there is less information available to calculate ROI. For example, with paid search you can accurately monitor individual keyword CPC, CTR and conversion rates on a daily basis.

While investing in paid search (PPC) is less risky in the short term because it has a quicker return on investment, its long-term ROI potential can’t even come close to SEO. Think about it, with paid search you are literally paying for every click.

The best CTR you can expect for an average PPC campaign is 5 to 10%. Whereas with SEO, a top SERP position could get you a CTR of between 30 and 40%.

Oh yeah, and did I mention, that with SEO you aren’t paying for every click? Except for the initial investment in SEO and the nominal fee of maintaining best practices, companies that were patient enough to invest years ago are now getting their clicks for free.

And they are getting LOTS of clicks.

Fortunately, there are ways to estimate your return on investment for search engine optimization. From agency veterans to in-house marketing interns, this SEO ROI help guide can validate your budget proposal and put you on track for long-term success.

What is SEO ROI?

Search engine optimization return on investment (SEO ROI) is simply the amount of return on an SEO investment relative to the investment’s cost. A high SEO ROI means that the investment’s gains compare favorably to the investment’s cost.

SEO ROI forumla | SEO ROI checklist

 

You need the following information to calculate the ROI of your SEO work:

  • Average monthly organic visitors before SEO campaign (AMOVB)
  • Average monthly organic visitors after SEO campaign (AMOVA)
  • Average organic conversion rate before SEO campaign (AOCRB)
  • Average organic conversion rate after SEO campaign (AOCRA)
  • Average order value (AOV)
  • ROI time period
  • SEO campaign cost (SCC)
  • SEO maintenance costs

Example SEO ROI calculation for a B2B business:

Average monthly organic visitors before SEO campaign: 2,000
Average monthly organic visitors after SEO campaign: 3,000
Average conversion rate from organic visitors before campaign: 0.5%
Average conversion rate from organic visitors after campaign: 0.75%
Average order value: $1,000
ROI time period: 24 months
SEO campaign cost: $20,000
Monthly SEO maintenance costs: $2,000

Calculating the monthly value of organic search before campaign:

= (AMOVB) x (AOCRB) x (AOV)

= (2,000) x (0.50%) x ($1,000)

= $10,000

Calculating the monthly value of organic search after campaign:

= (AMOVA) x (AOCRA) x (AOV)

= (3,000) x (0.75%) x ($1,000)

= $22,500

Calculating the value of your SEO campaign:

= $22,500 – $10,000

= $12,500

If you were to measure the return on investment with a time period of one month, this campaign would have a negative ROI. However, SEO isn’t like a billboard, magazine advertisement or paid search ad.

Assuming you made long-term, white hat SEO improvements, the increase in organic visitors from your efforts could last many months, and even years. Of course, SEO is a continual process that requires daily maintenance, but the bulk of the investment is made up front.

You need to define an appropriate ROI time period to account for long-term results in your calculation. For this example, I’m using a time period of two years, with a monthly SEO maintenance cost of $2,000.

Two-year ROI from SEO campaign, including monthly SEO maintenance cost:

= [($12,500) (24) – (($20,000) + ($2,000)(24))] / [($20,000) + ($2,000) (24)]

= $232,000 / $68,000

= 341.18% SEO return on investment

True ROI from SEO

Using the example above, a $20,000 SEO campaign with a monthly SEO maintenance fee of $2,000 would have a two-year ROI of 341.18%! That’s an excellent return.

And to be fair, this SEO ROI example doesn’t even consider the gains and value from assisted conversions and overall branding. In reality, the ROI from this example’s search engine optimization investment would likely be over 400%.

Imagine the same B2B business from the example above ran a Facebook ad that attracted 500 visitors. Now image that 5% of those Facebook conversions never would have clicked on the ad if they hadn’t already run across the business from searching relevant industry terms in Google several times earlier that year.

That’s an additional 25 orders, or $25,000 – a fair percentage of which should also be attributed to your SEO campaign.

Google has gotten much better at accounting for assisted conversions in the multi-channel conversion report, but it’s still a rough science. The fact that SEO can help increase conversions across all channels – offline and online – should be mentioned when helping marketing managers or clients make SEO budget decisions.

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