How To Measure Return On Investment On Your SEO Efforts
Return On Investment (ROI) is often mentioned as one of the best indicators that investments are justified. It’s an essential metric to determine how successful your business operations are and for agencies to demonstrate the results of their efforts to their employing companies. However, it can be harder to calculate results when it comes to SEO since they depend on numerous factors. Nevertheless, when you need to decide what marketing channels and SEO strategies give the best results, you will measure Return On Investment on your SEO efforts.
A few ways to measure Return On Investment on your SEO efforts
Generally speaking, SEO is constantly evolving. It provides businesses with a plethora of opportunities to improve their marketing strategy. But, this often ends in companies using several different approaches before deciding which one works the best. If you invest in multiple SEO strategies, ROI is what you need to see which ones bring the best results. So, you can either decide to adjust your SEO strategy or dismiss those that are not so profitable. This is essential, especially for business models that rely on SEO for profit.
What is ROI for SEO?
For SEO, there are different KPIs you can track and measure. From the number of visitors to conversion rates. But positive ROI is often the final measure of success. If you don’t calculate the ROI for your search engine optimization, it might be impossible to appropriately modify and plan your future strategies. It may often lead to misunderstanding, confusion, wrong decisions, and a desire to go for some less acceptable means to improve performance, such as spamming. That’s why it’s necessary to completely understand how to calculate ROI to avoid risky actions and steps that may hurt your SEO efforts in the long run.
The obstacles of measuring ROI for different businesses
The universal formula for calculating ROI is “(Gain from Investments – Cost of Investments)/Cost of Investments“. But the problem is that SEO doesn’t always give you completely accurate numbers. If you have an eCommerce business, revenue calculations will be easier mostly because you can connect the exact monetary values with different factors, like sold products. Once you know the right numbers, the rest is easy. But for businesses that rely on lead generation, it’s a bit more complex.
Calculating the investment first
The first step is to determine the costs of your SEO investments. In most cases, there are four major types of expenses:
- Costs of your in-house SEO – this includes salaries, hourly and daily rates for personnel.
- SEO agency costs – usually monthly rates you pay if you hire an agency to manage your SEO.
- Costs of investing in tools – often overlooked; they include licensing for software and other tools you use for your SEO efforts.
- Paid advertising costs – the amount you are spending on AdWords, PPC, and similar paid plans.
Sum of all these costs will give you the right picture of how much you invest in your SEO. However, remember that these numbers may differ on a monthly basis.
Calculating the ROI for SEO
Now that you know the investment costs, it’s time to calculate ROI. As we have said above, it’s different for eCommerce businesses that rely on on-site purchases and lead generation businesses that rely on off-site purchases. But in both cases, to measure ROI on your SEO efforts, you need to track conversions, for example.
Conversion for eCommerce
Because buying is conducted on the website, eCommerce calculation can be pretty straightforward. First, you will determine the amount of revenue you get from each conversion. Since you sell various products, you will need the average value. Second, take the number of visits and see what the average conversion rates are. Multiply the number of visits with the percentual conversion rate and with the average revenue. From the final number, you need to deduct investments, and that’s pretty much it.
- Visits x Conversion rate x Average revenue – Investments = ROI
Conversion for lead generation
The problem with lead generation businesses is that even though the transaction is off-site, the interest is still generated online. They rely on ranking positions and the number of visitors, even if they don’t sell anything online. This further complicates measuring mainly because not every lead is necessarily a monetary transaction. However, you can estimate the values by assigning the average revenue to each lead. For this, you will need to first see how many leads convert to sales. Then calculate the average value for each sale. And then determine what the average value for each lead would be. In the end, subtract the cost of investment from the approximate sum of all leads, and that will give you an approximate ROI.
How often to measure SEO’s ROI?
ROI for SEO should be measured monthly, especially for lead generation models, so that you can compare the results. Other than that, in the case of eCommerce businesses, it can be spread to quarterly and yearly calculations. It all depends on how soon you expect to see the results from your SEO. However, since SEO takes time to show the first results, you probably won’t see any significant progress in the first couple of months.
How to be sure your SEO ROI is good?
SEO ROI depends a lot on the type of business. Since each business is different, you can’t expect to see similar results for each business. Some companies might also be investing a lot more into their SEO, while others don’t. In addition, the price of different products or services often makes it impossible to compare them with each other. The best way to determine if your SEO is successful is to measure and compare the results for your business over several consecutive months.
No matter what type of business you run, taking the time to measure Return on Investment on your SEO efforts is worthwhile. Numerous tools can help you get insight into different metrics to see how successful your SEO is. Once you have the data about traffic, conversion rates, and other KPIs, it will be much easier to calculate if your ROI is good or not. It will give you the chance to adjust your strategies or redirect your investment to where they are needed the most.