fbpx

How To Calculate the ROI of SEO: The Essential Guide

by Toby

December 22, 2023

The ROI of SEO - How to Calculate It - Is It Worth It

Understanding the Return on Investment (ROI) of your Search Engine Optimization (SEO) efforts is beneficial and essential. After all, to be successful and maximize profit for your business, you need to understand which marketing yields the best returns and the most cash flow. 

I have been implementing SEO strategies for more than 20 years. In almost all cases, SEO consistently provides the best return on investment and the highest margins out of nearly every marketing or advertising tactic. 

In this post, I will cover how to measure the ROI from SEO efforts for several industries and then demonstrate financial results using a case study of an e-commerce site that illustrates the monthly financial benefits charted over 12 months. 

Prefer to watch a video on the topic?

Navigating Effort, Resources, and Success Factors

SEO takes effort and resources. The amount of effort, resources, and time to succeed depends on many variables that affect ROI and when you start to see positive financial returns. Some of these variables include, but are not limited to, the following:

  • Competition: Highly competitive industries or keywords can take longer to see results due to the high level of SEO efforts from other websites.
  • Website Age: Older websites often have more authority and trust in search engines' eyes than newer sites.
  • User Experience (UX): Site navigation, load time, and overall user experience can influence SEO results. Better UX often leads to higher engagement and lower bounce rates.
  • Keyword Difficulty: Keywords with higher difficulty (more competition) generally take longer to rank for compared to less competitive keywords.
  • Consistency and Frequency of SEO Efforts: Regularly updating the website, adding fresh content, and consistent SEO work are crucial for improving rankings.

Benefits of SEO

Google sees 8.5 billion searches per day (source). Most importantly, though, those searchers are warm, pre-qualified leads. We know they are interested in what we have because they had to type in the search terms, which is why SEO is so valuable. No other marketing tactic provides access to prospects like Google does.

Consequences of Not Tracking SEO Performance

Being clear about what your SEO goals are and what to track as success is essential to understanding its effectiveness. Otherwise, you’re flying blind. And what gets measured gets managed. 

  • Missed Opportunities: By not monitoring your SEO, you might miss out on opportunities to optimize your content and improve your search engine rankings.
  • Inefficient Use of Resources: With tracking, you will know which strategies are working and which aren't. This could lead to wasting time and resources on ineffective tactics.
  • Lack of Insight into Audience Behavior: SEO tracking provides valuable insights into how users interact with your website and what content they find most engaging. With this information, creating content that resonates with your audience is easier.
  • Lowered Competitive Edge: If your competitors are tracking their SEO and you're not, they'll have a clear advantage. They'll be able to quickly adapt their strategies based on data, while you're left guessing.
  • Difficulty in Setting and Achieving Goals: If you're not measuring your SEO performance, setting realistic goals or measuring your progress toward achieving them is challenging.

With Google Analytics (GA4) and Google Tag Manager, you can track exactly what behavior you want, such as form submissions, purchases, page engagements (i.e., 90% scroll), chat, link clicks, click-to-call phone numbers, click-for-driving directions, and more. (related post here on using GTM and Google Analytics).

Toby Danylchuk

Discover How Our Agency Can Drive More Leads and Sales To You

SEO - increase traffic and leads from Google

Content Marketing - from a data-driven topic strategy to awesome content

Paid Ads - Google Ads and Paid Social Media

Tracking SEO ROI Requires Defining, Measuring Conversion Actions

Your business type will determine what conversion actions get measured and tracked. 

Some variables may not go into an ROI calculation and are classified as secondary conversions. However, secondary conversions or behaviors are still necessary to track to understand better customer behavior and how to improve your SEO ROI. 

For example, if you’re an e-commerce site, sales as a result of SEO efforts are the primary variable of ROI. In contrast, how many cart abandonments are essential to improve your success but would not be part of calculating ROI. 

Why It Matters

It matters what conversion actions go into your ROI calculation because improving those metrics drives decision-making about necessary changes in strategy and tactics. 

Assign Value to Conversion Actions

When you identify the most crucial conversion actions, you assign them value to calculate an ROI or ROAS (return on ad spend). 

It's essential to consider the ultimate goal of your campaign and how each action contributes to that goal. 

Here's a step-by-step Approach

Understand Business Objectives:

Clearly define what your business aims to achieve with the website or campaign—be it generating leads, sales, brand awareness, etc. Knowing the end goal helps attribute value to the actions leading up to it.

Identify Conversion Actions: List all possible user actions that can be considered conversions. This might include filling out a form, clicking on driving directions, purchasing, signing up for a newsletter, etc.

Assign Monetary Value:

  • Direct Revenue Conversions: The value is the average sales revenue if the conversion is a direct sale.
  • Lead Generation: For actions like form fills, estimate the lead-to-customer conversion rate and the average customer value. For example, if 1 out of every 10 form submissions results in a sale, and each sale is worth $100, then each form submission might be worth $10.
  • Inferred Value Conversions: For actions like clicking driving directions or viewing a key page, you might assign value based on the estimated likelihood of these actions leading to a sale or desired outcome later.
  • Consider Lifetime Value (LTV): Understand the lifetime value of a customer, not just the immediate sale. A form fill leading to a small initial sale might lead to a high-value, loyal customer over time. If you have a recurring membership, what is the average value of that membership?
  • Analyze and Adjust: Use analytics to understand how different conversion actions contribute to your objectives. Not all actions will have the same value, and their importance might change over time or based on campaign data.
  • Use Benchmarks and Industry Standards: Look at what similar actions are worth in your industry. This can provide a starting point for valuations, especially for non-revenue-generating actions.
  • Test and Iterate: Continuously test different values and see how changing up the assigned values affects your ROI and other performance metrics. Adjust as necessary based on performance data and strategic changes.

Examples of Conversion Actions


Professional Services (e.g., Legal, Consulting, Accounting, Marketing)

  • Contact Form Submissions: Clients often contact professional services through forms on the website.
  • Phone Calls: Tracking calls from the website or a Google My Business listing.
  • Appointment Bookings: Online scheduling of appointments or consultations.
  • Downloads of Whitepapers or Case Studies: Indicative of engagement and interest in services.
  • Newsletter Sign-ups: Capturing leads interested in ongoing information or services.
  • Webinar Registrations: If the business offers webinars as a form of client engagement.

Restaurant

  • Online Reservations: Bookings are made directly through the website. For example, through Open Table. 
  • Online Orders: For restaurants offering takeaway or delivery services.
  • Newsletter Sign-ups: For promotional offers or event announcements.
  • Gift Card Purchases: Indicating customer loyalty or referral potential.
  • Menu Downloads: Showing interest in dining options.
  • Event Inquiries: For restaurants that host private events or parties.

Beauty Salon

  • Appointment Bookings: The primary conversion metric for service-oriented businesses.
  • Service Inquiries: Through forms or direct emails regarding specific treatments.
  • Gift Card Purchases: Often a popular choice for salons.
  • Newsletter Sign-ups: For updates on new services, products, or discounts.
  • Product Sales: If the salon sells beauty products online.
  • Membership or Loyalty Program Sign-ups: Indicating long-term customer engagement.

E-commerce

  • Product Sales: The most direct measure of ROI, tracking the number and value of sales.
  • Cart Additions: Monitoring items added to the cart, even if not purchased immediately.
  • Wishlist Additions: Interest in products that may lead to future sales.
  • Account Creations: Sign-ups for user accounts indicate a higher likelihood of repeat purchases.
  • Newsletter Sign-ups: For promotional and retargeting purposes.
  • Abandoned Cart Rates: To understand at what stage potential customers are dropping off.
Toby Danylchuk

Discover How Our Agency Can Drive More Leads and Sales To You

SEO - increase traffic and leads from Google

Content Marketing - from a data-driven topic strategy to awesome content

Paid Ads - Google Ads and Paid Social Media

The ROI Model

Calculating the ROI (Return on Investment) of SEO involves comparing the gains from SEO efforts against the costs incurred. 

Here's a step-by-step guide to help you calculate SEO ROI:

1

Identify the Gains from SEO

  • Revenue from Organic Traffic: Use analytics tools to track conversions from organic traffic. This could be direct sales from your website, leads generated, or other valuable actions users take.
  • Assign Value to Non-Monetary Goals: If the goal isn't directly related to sales (like form submissions, downloads, or engagement), assign a monetary value to these actions based on how they contribute to your business objectives.

2

Identify the Gains from SEO

  • SEO Expenses: Include all costs associated with SEO efforts, such as:
  • Salaries or fees for SEO professionals or agencies.
  • SEO tools and software subscriptions.
  • Training or courses to update SEO knowledge.
  • Content creation costs (writers, designers, video production).

3

Use The Formula for ROI

The basic formula for ROI is:

ROI = (Gain from Investment−Cost of Investment) / Cost of Investment ×100

Applying to SEO:

  • Gain from Investment: This is the revenue attributed to SEO or the assigned value of the goals achieved through organic search.
  • Cost of Investment: This is the total of all SEO-related expenses.

Case Study ROI Calculation for SEO Efforts

The below case study is for an e-commerce direct-to-consumer health product website. The niche is very competitive with other pure-play competitors and large, diverse conglomerates such as Amazon selling in the space. 

We had been executing an SEO strategy for a year that was focused on the following SEO tactics:

  • Producing or updating content as part of a data-driven content strategy and roadmap
  • Internal linking strategies
  • Site organization and structure
  • Technical SEO
  • Page Speed and Core Web Vitals
  • Code improvements and schema markups

SEO Growth Chart - Google Search Console

Below is a chart that shows the year-over-year organic traffic growth. The site has grown organic click traffic from Google by 462%. Excellent, consistent growth, but the real litmus test is in the financial returns of the SEO efforts and whether it generated positive cash flow.

Google Search Console Organic Traffic Growth

Google Search Console Organic Traffic Growth

Calculating SEO ROI

So, we built a simple model that used the following data points to calculate ROI by month:

Example:

  • Net Sales from Organic Search (Revenue - COGS)
  • Total Recurring Lifetime Value for the month
  • Total SEO Cost

So, our ROI for one month looked like this:

(Net Sales from Organic Search + Net Total Recurring Lifetime Value) / Total SEO Cost

We calculated metrics per month for a year of SEO investment. Here’s what that looked like.

SEO ROI Trending by Month for 12 Months

SEO ROI Trending by Month for 12 Months

Sales By Month Trending for 12 Months from SEO

Sales By Month Trending for 12 Months from SEO

New Organic Search Users by Month Trending

New Organic Search Users by Month Trending

SEO ROI Grows Over Time

When an SEO project begins, it takes time to ramp up efforts. And it takes time for the investment to pay dividends, so you need to measure results over time.

How fast the growth and return on investment (ROI) grows is dependent on many variables:

  • Effort: How much effort is put into SEO each month. Larger SEO budgets can produce more significant outputs and quicker results
  • Competition: if you’re in a competitive space, results will take longer
  • Google Algorithm changes and page layout changes
  • SEO is somewhat unpredictable because marketers do not control Google and cannot predict when algorithm changes will occur. Those algorithm changes can affect rankings and traffic positively and negatively.
  • Changes in Google’s page layouts can affect results, too. For example, adding local service ads, Featured Snippets, or a “Things to Know” section on an organic search results page.

In conclusion, businesses often struggle to measure SEO ROI due to its complex nature and timeline to see results. But remember, SEO is a marathon, not a sprint. It's a long-term investment that can yield significant dividends if done right. 

Therefore, tracking your SEO performance is crucial, allowing you to optimize your efforts and calculate ROI over time. 

The case study we've shared illustrates how focusing on content, technical SEO, and site optimizations can dramatically improve your online visibility and profitability. 

This isn't an overnight success story but a testament to the power of patience, persistence, and strategic SEO practices. 

As time goes on, SEO ROI compounds, delivering highly qualified traffic and customers at high margins. So, don't hesitate. Make SEO a core part of your marketing strategy today. 

And if you're unsure where to start or how to proceed, consider partnering with experienced SEO professionals who can guide you on this journey. The road to SEO success may be long, but the results are well worth the effort.

About the author 

Toby is the co-founder of 39 Celsius. He has over 20 years of digital marketing experience and has started several companies throughout his career. He's an expert in SEO, Social Media Ads, Google Ads, Marketing Automation, and more. He has a BA in Chemistry/Biochemistry from UC San Diego and an MBA from SDSU.

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}

Get in touch - how can we help you?

Your journey for better results online begins NOW!


>