As a business owner, you direct every action you take at improving your bottom line. Marketing, especially, is a portion of your budget that should spur positive growth and increase revenues. In the digital age, SEO comprises a large chunk of your marketing efforts.
SEO efforts leading to positive cash flow is exactly what business owners want. Unfortunately, SEO ROI, or the return on your SEO investment, isn’t exactly the easiest metric to calculate, especially when you compare it to the ROI for print ads or social media ads. This guide will discuss ROI, ROI meaning in SEO, and how to calculate SEO ROI for your business.
What Is ROI?
In general terms, ROI is the return on your investment – the amount of financial gain you can attribute to a specific action or set of actions. Typically, analysts reflect ROI as the gains produced by a particular investment as compared to the cost of making the investment in the first place. The profit left over after you remove the initial amount of the investment is your ROI.
For example, let’s say your company decides to invest in an ad campaign that costs $1000 to produce and get off the ground. Since you’re looking for the gains inspired by the campaign, you must find the average monthly profits and isolate any excess gains you could attribute to the campaign. Over three months, you see increases of $400, $500, and $450 over the average profits of your company. Calculating ROI in this case results in:
(Change in profits – Cost of campaign) / Cost of investment
($400 + $500 + $450 – $1000 / $1000 = .35, or a 35% ROI
ROI is an important concept to understand because it goes beyond even sales numbers and revenue to compare the costs of increasing your revenue. Even if your campaigns and other investments are bringing in business and money, if they’re costing you too much in the process, you likely need to reevaluate so you can produce revenue more efficiently. Calculating ROI using a marketing ROI calculator is one of the most important moves you can make so that you have all possible information available to you when it comes to making an investment decision.
ROI Meaning in SEO
When it comes to SEO, however, ROI is much more difficult to quantify for the average business owner. SEO service providers like to point out how many impressions your business page has made, or how well your relevant keywords perform on the average organic search for your product, but as a business owner, you want to know one thing – how has that translated into conversions? What measures should you be looking at to determine your SEO ROI?
First, it is important to understand the key goals of your SEO efforts. Your goal may be to rank number one for certain keywords, or to improve your inbound links from other pages. However, neither of these goals necessarily leads to profits.
If the keywords you rank first for are too vague or broad, you may not be increasing your click through rate at all. For example, if you sell syrup for shaved ice and rank high for the keyword “ice,” you won’t meet the needs of many or most of the users searching for ice. Similarly, if you drastically increase site visitors with inbound links, but those visitors come from a site with little relevance to your own, your new visitors will not likely produce profit.
What are your conversion goals with your SEO efforts? These could depend on the type of business you operate. Are you a service provider intent on building a customer base that subscribes to your newsletter? Are you a retailer focused primarily on increasing sales? Are you a business that thrives on referrals, subscriptions, or registrations? Measures of your SEO ROI must determine your efficacy in achieving SEO conversions.
Calculating SEO ROI
Before you can meet your SEO goals, however, you must of course drive traffic to your site. After all, you can’t expect to increase sales, referrals, or subscriptions if you can’t get new users to view what you have to offer. While site traffic isn’t the only measure of ROI for SEO, it’s likely the first you’ll need to calculate to determine whether your SEO efforts are effective.
The most basic goal of any SEO campaign is to make your web page appear higher on the search engine results page, or SERP. According to a compilation of studies outlined by Forbes, nearly 85% of Google search users click on a SERP result versus an ad. Nearly 68% of those choose one of the first five links. Clearly, ranking high puts you on the right track.
However, you must rank high for the right keywords; as mentioned before, ranking high for a keyword that is too general doesn’t lead to many click throughs. So, although ranking high is the most basic goal of SEO, increasing your click through rate is the most basic component of calculating SEO ROI. In the same vein, referral traffic from inbound links that are highly relevant to your product or service is another basic component of calculating SEO ROI.
Next, you’ll need to determine how many of those specific click throughs or referral links led to achieving your SEO goal – conversions. If your ideal conversion is for a user to join your mailing list to stay up to date on your next service offerings, how many of your SEO-produced click throughs led to a sign-up? If you’re a retail company, how many inbound links went on to make a purchase? Tracking your conversions through the network of links, referrals, and clicks takes time, but it is the best way to get a true sense of how effective your SEO really is.
Once you have a good handle on tracing your conversions to their sources, you can note how many conversions came from your SEO campaign and the change in conversions over time. Since the effects of your SEO efforts may have left an impression on future clients yet to convert, you can note the increase in traffic to your page as a result of SEO. Ultimately, calculating an estimate of the monthly traffic you require for SEO to make a difference in your conversions and using a marketing ROI calculator can help you get a feel for your SEO ROI.