How to Measure SEO ROI: 5 Common Questions
To do or not to do SEO? Chances are, you had already faced this question. If you only invest into search engine optimisation without measuring its value or financial return, you will have a hard time evaluating SEO influence on your business and sales.
From time to time I find myself in conversations where a client is unsure if SEO works at all, does not know how to measure it or wants results in a month after she started investing. Unrealistic expectations and misunderstanding of SEO value may result in failed investments, missed goals and shattered dreams. This article should help you answer questions like:
- Is it worth investing in SEO?
- How much should I invest in SEO?
- How long will it take to “do” SEO?
- Why is it that I cannot see SEO results?
- When will SEO pay off?
Select SEO metrics
In order to assess SEO ROI, first of all you have to find out:
- the value created by monthly organic search traffic,
- average annual value created by organic search traffic
Why is it necessary to measure monthly SEO value? Because it fluctuates depending on market conditions and other factors. However, this is where average value becomes useful: it will help you understand if SEO value tends to rise or to fall as time goes by. Average value eliminates the influence that external factors, such as seasonality, have on your business and helps you see if you are on the right track.
What exactly is visitor value and traffic value for websites? I will discuss this topic in detail in the upcoming articles. For the time being let’s take a look at a simple scenario with e-shop. In this case, we will consider turnover as value metrics. Now, should you take into account VAT and refunds? It depends on how you will use the numbers you will get. If you want to understand the direction of your SEO value, it does not matter whether you include VAT. However, if you want to try to calculate traffic profitability, VAT and refunds must be subtracted.
Perhaps you heard about attribution modeling theory. There are many ways to assign value to traffic metrics, but you might just as well keep things simple. Usually, I attribute 100% of turnover value to the channel that was the first and the only one to influence sales. If a client uses multiple marketing tools, I assign 10% of turnover value to the last channel customers used before buying.
This method is more than sufficient to understand traffic value direction. However, if you want to measure SEO profitability, you will have to look deeper and try to assess SEO traffic value in different buying scenarios. As before, I would recommend keeping things simple, because a profitable investment can usually be identified without complex calculations. In my opinion, statistics should only be used as much as needed to validate a business decision, whereas the main effort should be spent on creating results.
This is what my traffic value attribution model looks like:
Part of your organic traffic will come from scenarios where users dial your website’s URL into a search field and then hit a link. Users like these should be filtered from SEO traffic and assigned to direct traffic. Otherwise, SEO value may be distorted and lead to result misinterpretations and wrong business decisions. SEO traffic should only include visitors who come to your website looking for your product or solutions to their problems.
So, we have four areas where mistakes could happen:
- Attributing traffic value to channels
- Assessing value (in monetary terms)
- Assessing channel value
- Assessing channel costs
It is not unusual for businesses who manage SEO by in-house specialists to miscalculate SEO costs and come up with numbers that create an illusion of a highly profitable investment. Most often, people forget or miscalculate costs for personnel, training, and administrative stuff. One more thing that is almost always omitted is losses of potential income.
It is enough to slip in any of the places mentioned, and results may change dramatically. And slipping is inevitable. Just do your best to foresee in which cases the margin of error would be detrimental for your business and when mistakes could be allowed.
During initial months of investing in SEO (point A on the graph) some clients begin to hesitate whether it makes sense to proceed. Obviously, costs, especially in the beginning, can be significant, and benefits are nowhere in sight. However, it is too early to calculate SEO in this stage. It takes time for “Google” to process changes in website and update its positions in search results.
If you invest in SEO regularly, organic traffic value eventually stabilizes. How to know if that has happened already? One of the best signs is keyword average position in search results (you can check it using “Search Console” or similar tools) If your website occupies the first position, it is highly likely that organic traffic and its value will not increase further – of course, under condition that your business is not influenced by seasonality.
You can calculate SEO ROI using a simple formula:
SEO ROI = ((SEO Value – SEO Costs) / SEO Costs) x 100%
Let’s say that your monthly SEO costs are 1000 Euros, and your organic traffic value reached 2200 Euros. Then SEO ROI = ((2200 – 1000) / 1000) x 100% = 120%
This formula does not show if SEO is profitable. For instance, if your markup is 10%, you will earn 100 Euros by selling monthly product worth of 1000 Euros. However, if on the same month you invested 1000 Euros in SEO, your actual monthly “profit” is -900 Euros (not including other costs), so you need a lot higher turnover for SEO to pay off. Positive ROI only means that value is higher than costs.
If you want to forecast SEO ROI, you need to know average long-term SEO value. To do this, find a spot in SEO value graph where annual organic traffic value could be visually divided in half (point B). Then, you can take total value and costs from either side and apply the formula.
Sometimes, SEO ROI can be a negative number. Does it mean that optimisation is ineffective? Not neccessarily. First of all, check if your calculations are correct. However, the real SEO ROI could only be assessed in wider context.
- Direction is more important than momentary results. That’s why SEO value graph is fundamental. When you can see where you are and where you are heading, you can make appropriate changes in SEO strategy. For instance, if sales do not increase, you could try working with different keywords.
- Do not judge SEO value based on turnover only. Take into account not-so-obvious value that optimisation brings. For instance, SEO may generate additional newsletter subscribers who will become clients later. Besides, new clients from organic traffic may recommend your product to their friends. Quite often, visitors from organic traffic later come to a physical shop. On the other hand, negative SEO ROI is not neccessarily a result of poor SEO strategy – there may be other factors involved.
Compare SEO ROI with ROI from other digital marketing channels. If you use „Google AdWords“, social marketing or email marketing, sort those channels by their ROI to see which tool is the least useful. Perhaps you could transfer its expenses to a more effective channel and increase overall ROI? Of course, if you want to compare channels, make sure to use the same measuring principles and methods throughout.