[Hot] How to Calculate SEO Return on Investment (ROI)
Moz recently posted a blog exploring "three fundamental challenges standing between SEOs and clients." The post cited the Moz 2017 readership survey, which revealed a few themes, including the troubles SEOs have communicating the value of SEO and proving ROI for SEO efforts.
We explored these topics on The Organic SEO Blog before, notably in a discussion with our blog's sponsor, Alex Stepman, of Stepman's SEO, who frames the value of SEO (and the potential ROI) in terms of traffic and conversions:
"If you know how much traffic your receive," Stepman says, "and you can quantify that number in dollars, you can easily see the difference between, say, the third result and the first result."
Stepman's inference here, of course, is that the first result receives more traffic than the third result; we know this to be true from industry analytics. According to a 2013 study from Chitika, for example, top results receive 33% of all traffic; the second result receives 18%; and the third result receives 11%. (The first page receives 92% of all traffic).
The author of the Moz article, Serge Stefoglo, quotes Mike King, the managing director of IPullRank, who also quantifies the value of SEO and the potential ROI with reference to traffic conversions.
Here is King's "simple" equation.
"By researching your market's successful keywords, you learn how to brand your business and how to compete against the current top sites. Successful keyword research can also give you valuable insights into your potential customers. More to the point, ranking for the right keyword often means the difference between success and failure."
Read: How to Perform Keyword Research
However, of course, ranking for any given keyword is not enough. You must also attract clicks.
Click through rate is the difference between how many people see your result in the rankings and how many people actually click-through to your page.
So traffic in this scenario is simply defined by the volume for any given keyword X the clicks to your site.
If you're looking for an SEO company that understands how to effectively promote websites with actionable content that converts visitors, we suggest contacting our sponsor, Stepman's SEO: 215-900-9398.
Stepman's SEO combines traditional marketing methods and organic SEO--with an emphasis on natural website optimization--to design thoughtful, inspiring, and effective content marketing campaigns.
We explored these topics on The Organic SEO Blog before, notably in a discussion with our blog's sponsor, Alex Stepman, of Stepman's SEO, who frames the value of SEO (and the potential ROI) in terms of traffic and conversions:
"If you know how much traffic your receive," Stepman says, "and you can quantify that number in dollars, you can easily see the difference between, say, the third result and the first result."
Stepman's inference here, of course, is that the first result receives more traffic than the third result; we know this to be true from industry analytics. According to a 2013 study from Chitika, for example, top results receive 33% of all traffic; the second result receives 18%; and the third result receives 11%. (The first page receives 92% of all traffic).
The author of the Moz article, Serge Stefoglo, quotes Mike King, the managing director of IPullRank, who also quantifies the value of SEO and the potential ROI with reference to traffic conversions.
Here is King's "simple" equation.
- Traffic = Search Volume x CTR
- Number of Conversions = Conversion Rate x Traffic
- Dollar Value = Traffic x # Conversions x Avg Conversion Value
Moz writes for the SEO community, so equations of this sort may seem obtuse to casual observers, many of whom make up our audience. However, the equation here is spot-on; when explained in detail we believe it can offer a streamlined view of SEO's tangible value.
So what does the equation mean? We explore each line of this equation below...
So what does the equation mean? We explore each line of this equation below...
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| An effective SEO campaign will reveal (first) an increase in website traffic. |
Traffic = Search Volume x CTR
The first part of King's equation defines SEO traffic with reference to search volume and "click through rate."
Search volume is not exclusive to any single site; instead search volume defines the amount of searches for any single keyword. SEOs study keywords to discern how and where to compete. In our estimation, few SEO activities match the potential ROI of keyword research. As we've noted before:
Read: How to Perform Keyword Research
However, of course, ranking for any given keyword is not enough. You must also attract clicks.
Click through rate is the difference between how many people see your result in the rankings and how many people actually click-through to your page.
So traffic in this scenario is simply defined by the volume for any given keyword X the clicks to your site.
Number of Conversions = Conversion Rate x Traffic
Optimizing click through rate is a crucial aspect of SEO. But a click is not enough. To earn money you must inspire conversions: when a website visitor performs a desired action on your site, like purchasing your product or service.
Conversion rate is the percentage of people who click to your site who actually "convert."
By viewing this percentage with reference to traffic (as defined above) you can see how conversions increase with traffic. This is simple logic, yet it's essentially the template for most SEO ROI predictions.
Optimizing click through rate is a crucial aspect of SEO. But a click is not enough. To earn money you must inspire conversions: when a website visitor performs a desired action on your site, like purchasing your product or service.
Conversion rate is the percentage of people who click to your site who actually "convert."
By viewing this percentage with reference to traffic (as defined above) you can see how conversions increase with traffic. This is simple logic, yet it's essentially the template for most SEO ROI predictions.
Dollar Value = Traffic x # Conversions x Avg Conversion Value
The final step of King's scenario quantifies the most important part of any ROI report: the dollar value. Here the client must supply the definitive information.
The average conversion value is the average worth of all website conversions.
Just remember, any single purchase may have more value than the immediate profits. Google defines "conversion value," for example, with reference to the short-term value and long-term benefits of a conversion, which include word of mouth referrals and repeat business.
Defining a conversion value is really about defining business goals. As Google notes:
"Short-term conversion values can be useful when you want to maximize immediate profit or customer acquisition as cash flows allow. Lifetime conversion values can be more useful when trying to maximize long term growth. When choosing a conversion value, it’s important to opt for a method that aligns with your goals."
Once conversion value is defined, an accurate SEO ROI report reveals how this value is impacted by increased traffic and conversions. Simple, right?
In the end, dollar value is simply a measure of how increased traffic and clicks leads to more conversions. Assigning a dollar value to these conversions is how an SEO calculates ROI.
The Value of SEO
To repeat: Organic SEO increases website traffic (and CTR). Organic SEO also increases conversions by optimizing each page for this explicit purpose. If you can attach a definitive dollar value to your website's average conversions you can easily see how an increase in traffic and conversions will lead directly to profits--and a good return on investment for your SEO efforts.
SEO That Makes You Money with Stepman's SEO
The final step of King's scenario quantifies the most important part of any ROI report: the dollar value. Here the client must supply the definitive information.
The average conversion value is the average worth of all website conversions.
Just remember, any single purchase may have more value than the immediate profits. Google defines "conversion value," for example, with reference to the short-term value and long-term benefits of a conversion, which include word of mouth referrals and repeat business.
Defining a conversion value is really about defining business goals. As Google notes:
"Short-term conversion values can be useful when you want to maximize immediate profit or customer acquisition as cash flows allow. Lifetime conversion values can be more useful when trying to maximize long term growth. When choosing a conversion value, it’s important to opt for a method that aligns with your goals."
Once conversion value is defined, an accurate SEO ROI report reveals how this value is impacted by increased traffic and conversions. Simple, right?
In the end, dollar value is simply a measure of how increased traffic and clicks leads to more conversions. Assigning a dollar value to these conversions is how an SEO calculates ROI.
The Value of SEO
To repeat: Organic SEO increases website traffic (and CTR). Organic SEO also increases conversions by optimizing each page for this explicit purpose. If you can attach a definitive dollar value to your website's average conversions you can easily see how an increase in traffic and conversions will lead directly to profits--and a good return on investment for your SEO efforts.
SEO That Makes You Money with Stepman's SEO
If you're looking for an SEO company that understands how to effectively promote websites with actionable content that converts visitors, we suggest contacting our sponsor, Stepman's SEO: 215-900-9398.
Stepman's SEO combines traditional marketing methods and organic SEO--with an emphasis on natural website optimization--to design thoughtful, inspiring, and effective content marketing campaigns.