One you’ve determined how much revenue your SEO strategy generated during a specific time period (typically a month or a quarter), you can compare that amount to your SEO investment during that time 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.
How much do you invest in SEO each month, and how do you estimate the worth of your investment?
If you want your website to rank high in Google searches and attract visitors and potential business, you should be investing in SEO. And because many businesses say they don't invest in SEO campaigns at all, doing even a small amount of optimization puts you ahead of much of the opposition.
To get the most from your spending, think about the basic formula for SEO return on investment: Earnings from SEO - Cost of SEO ÷ Cost of SEO = ROI.
What you spend and what you earn from your website will depend on various factors, including these:
1. Type of business
2. Size of business
3. Size of competition
4. Size of website
Understanding how to calculate the ROI of your SEO campaigns according to the KPIs you have in place is vital for every business.
What is an SEO campaign?
There are two main types of search engine optimization: on-page optimization and off-page optimization.
On-page optimization is the process of improving an individual page's online visibility by incorporating well-researched keywords into its content and HTML source code.
Off-page optimization raises a page or website's visibility through links from websites and other signals that take place somewhere other than your site, such as social media activity, advertising, and other promotional methods.
How does an SEO campaign work, and how much should you pay?
The cost of your campaign will depend on the expertise and knowledge of the person or company doing the SEO. The success of the campaign depends on the skills of that person or company.
So, what are you paying them to do?
1. Find the best keywords and associated long-tail keywords for your business
2. Structure your site around those keywords in a way that fits your ideal potential customer
3. Formulate content strategies to increase engagement and sales
4. Gain traffic from your competitors
5. Monitor traffic to your site for broken links and slow page speeds
6. Stay abreast of new algorithms that could cause your traffic to trough
Ultimately, you hire an SEO expert to push your site toward the top of Google's search pages so you can make more money. Whom you choose to do the job will depend heavily on your budget. If you opt for someone who offers to manage your SEO for 100 bucks, however, your ROI will reflect that price. You get what you pay for, as they say.
How do you define and measure ROI?
The following are common ways to gauge SEO ROI:
If you're investing in SEO, you need a Google Analytics account tied to your site. It's a free but valuable tool that provides insight into the success of your SEO efforts.
To calculate the return on investment of search engine optimization campaigns using Google Analytics, you need to (1) set up tracking, and (2) monitor sales or website traffic. You can then use the data you harvest to derive ROI.
Setting Up Conversion Tracking
A conversion occurs when a visitor to your site becomes a customer. A customer is anyone who purchases from your e-commerce site or an affiliate site you direct them to.
To set up Google conversions, go to the homepage of your Google Analytics account. In the left sidebar titled Reports, click on the bottom option, Conversions.
Monitoring E-commerce Sites
To determine the return on investment from SEO on an e-commerce site, you can track the revenue directly from the site's account, or you can track sales and visitors to the site by enabling e-commerce in Google Analytics.
To track visitors, you should have basic page tracking code on your site. If you're using a third-party shopping cart, such as PayPal, you'll need to set up cross-domain tracking so you can monitor visitors to both your site and the shopping cart.
Once you've added tracking to your site, you can monitor visitors, conversions, and sales from the Analytics dashboard by visiting Conversions > Ecommerce > Overview.
The return on investment of your site needn't relate to sales only. It can also refer to other objectives. For example, you might want to get 100 people to sign up for a newsletter, or you might aim to have 50 people watch your YouTube video. Those are indirect sales objectives that engage visitors who may eventually become paying customers.
Monitoring Lead-Generating Sites
If the site that you're optimizing generates leads rather than sales, you can still assign your conversion goals a monetary value based on prior sales history. For example, if 50 of 100 people who signed up for your newsletter bought a product, and each sale generated $10, that would mean those 50 people generated $500 in sales.
For lead-generating sites, create goals by heading to Admin > View > Goals in Analytics. A monetary value can be assigned to various parameters:
Estimate your average conversion rate using the relevant goals in Analytics; then set goals to improve each conversion rate.
After about a month, statistics should show you how much your site has been earning and allow you to calculate your ROI.
Say you paid someone $10,000 to optimize your site and you generated $2 million in sales. You would use the previously mentioned formula: Earnings from site - Cost of SEO ÷ Cost of SEO = ROI from SEO.
So, in this example: 2,000,000 - 10,000 ÷ 10,000 = 199. Multiply the number you derive by 100 to get a percentage—19,900%, in this case.
And there you have it. The takeaway, again, is that a small amount of optimization can generate significant returns.