How to Calculate The ROI of SEO
Measuring the ROI of SEO is tricky for many reasons, making it a challenge for organizations to make marketing decisions. When properly determined, though, the return on investment for SEO strategy can lead to improvements in project efficiency and provide actionable insights into consumer interests, changing demographics and developing opportunities.
What Is the ROI of SEO?
Return on investment is a formula applied to almost every component of your organization – in short, what does any expense category do to help your business grow? Understanding your SEO ROI can be challenging, especially when working with less-than-reliable data. Even with expert reporting, it takes time to identify and optimize performance to meet your marketing goals.
How to Calculate the ROI of Your SEO
Like almost any ROI calculation, the return-on-investment formula subtracts your SEO costs from the value of conversions, divided by the total investment.
SEO ROI = (Total value of conversions – Costs of SEO) / Total costs of investment)
Seems simple, right? The challenge is compiling accurate conversion values and tallying the expenses associated with SEO marketing.
Let’s crunch some numbers.
1. Establishing SEO Costs
Make sure to account for everyone working on SEO, both in-house and SEO agencies.
- In-house SEO – Calculating how much your team invests in SEO is often the most challenging. Small teams wear many hats, often jumping from SEO to copywriting to making TikTok videos in a single afternoon. Focus on accurately tracking time spent on SEO tasks and convert it to a dollar amount based on an hourly rate.
- SEO agencies – SEO retainers or projects are the easiest to calculate because you’ll have a set invoice. Adjust your monthly or annual agreements to match the period of data you’ll evaluate – we recommend looking at year-over-year comparisons. SEO service costs vary widely, and you get what you pay for. With less-than-stellar agencies, you may not even get that.
- Software – Don’t forget to include the cost of SEO tools and resources, which typically have an annual or monthly subscription price.
- Establishing Conversion Value
For ecommerce brands, conversions are relatively easy to track – just total up the revenue driven by organic conversions.
But what if a conversion isn’t a sale? Assigning conversions like lead generations can get murky fast. There are a few ways to address this, but multiplying your organic conversion rate by your customer lifetime value is the most useful method.
Also known as LTV, customer lifetime value is the total revenue the average customer spends with your organization. If the average customer spends $250,000 and your lead conversion rate is 1%, your lead conversion will be $2,000.
This isn’t a perfect formula, of course. Some customers will spend less and some will spend more. Your conversion rate may change dramatically within a single year or over several years, making frequent adjustments to this calculation crucial to accurate reporting. Nonetheless, it’s the best way to establish conversion value and measure your SEO ROI.
2. Do the Math
This is a great time to create an example. Let’s say Fresh Air Guitars is looking to reevaluate its SEO efforts before setting its new marketing budget for next year.
Here’s how that might look:
Cost of SEO
$15,000 in-hour (about one-third of Debra’s time. Have you met Deb? She’s incredible.)
$30,000 SEO retainer with Oneupweb
Last year, organic search generated $320,000 in revenue, not to mention more than 60% of the site’s total sessions.
($320,000 – $45,000) / $45,000 = $6.1
For every single dollar spent on SEO, Fresh Air Guitars sees $6.10 come back into its coffers. That’s a 610% ROI on SEO!
Why Measuring the Return on Investment of SEO Is Difficult
That probably looked easy, but it’s important to stress that ROI calculations rely on accurate reporting. As a part of your SEO retainer, our SEO experts will test, evaluate and ask your permission to adjust events and conversions in Google Analytics 4. This in-depth effort delivers the actionable data you need to make informed decisions.
- Goal tracking – Are you properly tracking all types of leads?
- Call tracking – This may be the most difficult. At the bare minimum, you should be tracking clicks-to-call. This is easy to set up via Google Tag Manager. The problem with clicks-to-call is that you don’t know the quality of the calls coming in. You can assume some percentage of these calls are accidental. So, it’s challenging to relate clicks-to-calls to actual business transactions without proper call monitoring.
- Google Business Profile – Formerly Google My Business, Google Business Profile is appearing more prominently than ever, which means fewer users are clicking through to the website to find business information. The phone number is in GBP, and so are other ways to contact or convert. If your SEO included any elements of Google Business Profile, it’s essential to include this information in your calculations and to carve out time to focus on this important platform.
- Other marketing initiatives – Direct mailers, radio drops and television ads can cause more users to take to Google, which can result in a spike in organic traffic and conversions (usually coming in through the homepage). If you suspect any organic spikes result from a traditional marketing campaign, consider accounting for that data with an advanced segment.
- Length of engagement – Good SEO achieves long-lasting results, but it can sometimes take months before these results take hold. There’s always a chance that you’re measuring the results prematurely and are not accounting for future returns. Return on engagement is another metric some businesses attempt to measure separately.
Is SEO Worth It?
Like any math exam, marketers will always have to show their work. Professional SEO services, allotted the time and authority to make metric-driven recommendations, will deliver results. Estimates for the SEO ROI statistics show wide ranges from a healthy 275% to an eye-popping 1,220%.
What’s the ROI of Your SEO Campaign?
With Oneupweb, you receive monthly performance calls and an in-depth report as a component of your SEO engagement. Need more numbers? We can structure your retainer to include bi-monthly, monthly or quarterly reports, too. We’re committed to transparency and accountability.