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ROI of SEO

July 04, 2012 by Mainak Biswas under SEO Strategy520 views
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When we are talking about ROI from SEO, We assume you are a website owner, running a business through your website. You have hired a SEO agency or an internal team for your online business promotion. This article will help you to understand how good is your SEO with respect to the money you are investing on them,

The truth about website traffic from SEO (you should know and can’t blame on the team)

  • There is no magic formula to improve the traffic. Don’t expect it in the 1st month itself.
  • The conversion rate from organic traffic can’t be compare with any other medium.
  • Website content and design change suggestion will come from the agency but your involvement is highly necessary.

1st Step- For calculation of any type of ROI the base month’s statistics are highly needed. You need a benchmark to start with. So, keep every possible data from you analytics from the 1st month itself.

  • Keep track of visits from non paid search.
  • Keep track of no. of keywords except brand name that brings traffic to the site.
  • Keep track of traffic from branded keywords from organic result from the 1st month.
  • Keep track of goal completion in the 1st month (most important).

2nd Step- Calculate the average prices of your products/services, if direct payment option is not available on the site then calculate the conversion rate from your leads based on the previous history.

3rd Step- Create a filter for organic search, check if the conversion tracking is working accurately or not.

CALCULATION 1

This method works best, where revenue from each sale can be quantified, generally in B2C scenario and where you have strong sales channel attribution process.

Example: If the average product/service price is – $150
The conversion rate from organic leads is 2% (based on the previous history)
It means out of 100 prospective/ form fill up you are getting 2 customers => $150*2=$300
To get 1 perspective /form fill up/ = $3
In this case if from the organic search you are getting 50 leads then it is worth of $150.
So the Formula => Total Gain (Average price* leads*Conversion Rate) – Total Spend

There are lots of factors, which may add inaccuracy in the calculation. As you take them into consideration, the simple looking calculation may become quite a complex formula. Some of these factors are (for example):

A) How does SEO impact the decision of an existing client to buy the product from you via-a-vis your competitor?

B) The rankings may have fallen, but the search volume has increased giving you the benefit of increased demand. The reverse, however, is also true!

C) The rankings for the keyword for which Optimisation was done may not have contributed to the client acquisition.

Therefore, this base calculation need to be refined and tweaked to fit the given requirement, sometimes with added complexity to track the improvement in organic traffic due to the campaign and keeping out the normal variances.

In absence of the above scenario, the following method can be used:

CALCULATION 2

Savings potential (Savings, when compared to SEM or Media buying for the same traffic)

This is much more straightforward, and talks more in terms of savings in terms of cost of acquisition of traffic and not in terms of profit gained due to the campaign.

So, let’s say the website gets an increase in organic traffic to the tune of t. Now, the keywords for which the traffic has been generated must be noted. Let’s say the keywords were k1, k2, k3, etc and the average market price of CPC of those keywords are p1, p2, p3, etc respectively. Further let’s assume that t= t1+t2+t3… each of them aligning to their respective keywords and prices.

This translated to the total saving due to the campaign and the profit from the campaign can be calculated as: (p1.t1+.p2.t2+ p3.t3+ …) – C (campaign cost)

Example: Google adwords charges $2 per click for key phrases 1 and $1.5 for key phrase 2 at your targeted locations.
For those particular keywords you got 50 visits each from organic search.
If you spend $100 for the SEO team then ($2*50 + 1.5*50) – $100 = $75 is your profit from the SEO campaign.

ROI from SEO= number of organic visitors from targeted keywords * adwords bid of those keywords – cost of SEO campaign

It is always complex to calculate ROI of SEO, and more so in a multi channel marketing environment. It is made further complex by the fact that different methods of Internet marketing support each other and therefore silently steps into each other’s territory.

As a result, the calculation can never be precise. But, you can get an approximation from the above suggested methods.

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