How to Efficiently Calculate the ROI on Your SEO Investment

How to Calculate the ROI on Your SEO Investment

 

Many companies seem to have one big issue with SEO – they just can’t figure out if they’re making a profit or loss from their SEO campaigns.

So, what have they done about it?

Most of them have turned their backs on SEO and directed all their marketing efforts to paid search instead because it’s easy to track their ROI.

Big mistake if you ask. 

What’s these companies don’t know is that SEO has the best long-term returns. It’s the only campaign that will continue to drive revenue months after your campaign ends. 

The Long-Term ROI of SEO

If you’re looking to generate great returns within the first quarter or six months of running your campaign, then SEO isn’t the marketing strategy for you. 

But if you’re looking to dominate your niche and establish yourself as the market leader in the next two years or so, SEO is the strategy to prioritise. 

Still, on the question, how do you measure the returns on your SEO campaign, or do you just run it blindly?

The answer is no – there might be no straightforward procedure on how to measure the ROI on your SEO campaign, but there’s a way to find out if the campaign is making you a loss or profit.

Understanding the Basic Framework of SEO ROI

The term ROI is hugely misunderstood and even taken for granted by certain groups of marketers. 

In the most basic sense, ROI translates to the profits you make at the end of each investment, calculated as a percentage. 

For example, if after investing $1000 into a business and it ends up making you $200 in returns (such that your money grows from $1000 to $1200), then your ROI is 20% (calculated as total profits/total investments *100). 

(200/1000) *100 = 20%. 

So, to calculate the ROI on your SEO campaign, we first have to calculate your SEO profits:

SEO profits = the revenue generated by your SEO campaign – the total SEO cost. 

The two variables (the total revenue your SEO campaign generates and the total SEO cost incurred) are integral in determining your SEO ROI.

So, we’ll try to break down each of these two variables, and in the end, help you figure out how to calculate each one of them best. 

How to Calculate Your SEO Cost

SEO is complex, a versatile marketing channel with no one particular path or approach to follow. There are so many directions to swing by.

So, how much it will cost you to run a successful SEO campaign is totally up to you and the approach you use. 

SEO is free in the sense that you do not have to pay search engines for the traffic they generate. Meaning, if you’re willing to learn and do everything by yourself, then SEO can be 100% free.

By why would you choose to hire an SEO expert?

Because effective SEO is time-consuming — keyword research, technical optimisation, content development, and other SEO activities all take time to both perfect and conduct.

So, how you calculate your SEO cost depends on the SEO approach you use. In which case, there are two broad ways to conduct SEO:

  1. Where you conduct all your SEO activities inhouse, either by yourself or with your team
  2. Where you outsource the service to an SEO expert, in entirety or in-part

The Cost of Outsourcing SEO to an Expert

For the latter case, the SEO cost you incur translates to the amount that you pay to the SEO expert. This amount tends to vary from one agency to another and can be charged on an hourly, monthly, or based on the amount of effort pumped in. 

However, in general, if you choose to go with one of the top SEO experts in Singapore, then SEO will typically cost you between $500 to $1000 per month, with a national or global campaign going for at least $3000 or $5000 per month. 

The Cost of Doing Your own SEO (In-house)

Understanding the cost of running an SEO campaign will justify how much you pay when outsourcing it to an expert. 

Here are some of the common variables that play into the cost of doing your own SEO:

  • The Cost Incurred in Using Various SEO tools and software: Let’s get this straight – there’s no effective SEO without tools. You need SEO tools to do keyword research, monitore the campaign, and link analysis, among other activities. In which case, you should be prepared to shell out between $0 and $1000 for these tools. 
  • Content Creation cost: If you have a way with words, you can write your own content and cut the cost to zero. Otherwise, you should be prepared to spend between $100 to $10000 per month to have someone write the content for you. 
  • Content Promotion Cost: The amount you spend to promote your content on the various social media channels, and other platforms can vary significantly depending on your budget and promotion level. 
  • The Cost of technical SEO: The amount you pay to have someone look into your website and tighten or fix some of the nut and bolts affecting your SEO effort can range from $100 to $180 per hour depending on the web developer you’re hiring.
  • Link Building: We’re not talking blackhat SEO links. But the cost of organising a PR campaign, influencer outreach, and so on. The cost for this can range anywhere from $0 to $500 per link. 

This list doesn’t exhaustively cover everything. There are other costs you may incur, but this should give you a rough idea of how much your SEO campaign is going to cost you. 

The point is to come up with a budget and stick with it. Remember to also estimate your potential ROI by working everything on paper before trying them out in real-time.

The next thing you want to calculate after calculating the cost of SEO is to calculate the revenue generated by the campaign. 

Calculating the Revenue Generated

Things get a little bit murkier when it comes to this – the reason being, no two companies have the same revenue model. Plus, how SEO contributes to these revenue models is different from one company to another.

In general, we can broadly categorise businesses into three as far as their revenue stream goes:

Businesses Making one-time sales or services

Examples include blogs that review physical products on their websites. Affiliate product selling also belongs to this category. 

They have the simplest revenue models to calculate. Here, the one-time sales generate revenue, which is to say SEO impacts this revenue model directly. 

But instead of calculating the single-sales conversions, you should calculate the customer’s lifetime value. 

What’s Customer’s Lifetime Value (CLV)?

This is the projected revenue generated by the customer during their relationship with your business. 

There are different ways to calculate CLV, but here are the four common ones:

  • Average Customer Lifespan: The average number of years your customers will be purchasing from you. For example, if you’re planning to sell diapers, then the average customer lifespan might range from 2 to 5 years. 
  • Average Purchase Value: With this option, you divide your total revenue by the number of total purchases over a given period (say one year). For example, if by the end of the year you made about $10 000 sales in total after 100 purchases, your average purchase value becomes $10000/100 = $100. 
  • Average Purchase Frequency: This is achieved by dividing the total number of purchases by the number of new or unique customers. For example, if the number of new purchases is 100 with 50 unique customers, your average frequency purchase (AFP) is 100/50 = 2. 
  • Customer Value: This can be reached by multiplying the APF by the purchase value. 

Using our examples: 2x$100 = $200. Our Customer Value = $200. 

Customer Lifetime Value can be calculated by multiplying customer value with the average customer lifespan. Using the same example above, if the customer’s lifespan is five years, then the CLV is 5*200 = $1000. 

Business Selling Recurring Products or Services on their Website

Such businesses have recurring revenue models—examples include SaaS Companies selling subscription-based software (such as Moz and HubSpot). 

Here, the CLV is calculated a little bit differently, mainly through two metrics: Monthly Recurring Revenue and Annual Recurring Revenue (MRR and ARR). 

Here’s an example explaining how the two metrics are achieved: 

Let’s assume the MRR for a new customer is $5000, and we’re looking to generate 100 new customers per year. Through SEO, content marketing, and organic reach, we manage to generate 50 new leads every month. 

With a 30% lead to sales conversion rate, the 50 leads will generate about 15 sales every month. 

Using these examples, we can calculate the revenue generated through SEO as follows: 

  • MRR/Customer = $5000/month
  • ARR/customer = $5000 x 12 = $60, 000/year
  • Conversion Rate (Leads to sales) = 30%
  • SEO-generated leads: 50/month
  • SEO-generated sales: 30% of the 50 SEO generated leads = 15 Sales per month, 180 sales per year
  • Additional ARR from the 15 sales per month: 15 x5000 = 75, 000

75, 000 x 12 = $900, 000 per year

Non-ecommerce companies, selling no product of services on their websites

Examples include old-school cell phone repair companies. The only reason such companies would want to engage in SEO is for lead generation. Meaning, SEO doesn’t directly impact their revenue, but it does bring about some value. 

Calculating the Revenue for Lead-based Businesses

Calculated generated revenue for lead-based businesses is a little complicated, considering it’s not directly impacted by SEO.

You first have to identify your visitors’ actions, after which you want to figure out how these actions contribute to the generated revenue. 

The process of doing this is what’s commonly referred to as the marketing attribution model. 

So how do you determine SEO contribution to your marketing attribution model?

Here’s an example that explains how to go about it:

Assuming you generate about 1000 new leads every month through organic SEO. That’s, 1000 people subscribe to your email list after they come across your new blog post.

If 200 of these people end up purchasing your product, then your conversion rate is 20%.

Still, on the same example, if the CLV for each customer is $5 000, then the total sales made from them will be $5 000 x 200 = $100 000. 

The next thing you want to do is divide the $100 000 by the original number of leads generated through SEO. In our case, we have 1000 new leads. Dividing the $100 000 by 1000, and each lead generated through SEO is now worth $100. 

How to Calculate Your SEO ROI

Let’s go back to where we started and calculate your SEO ROI.

Calculating Your SEO ROI Based on the Generated Revenue

Remember the formula?

SEO ROI = (The Revenue Generated through SEO – The Cost of SEO) * 100

And now that we’ve identified how to calculate the two variables, calculating your SEO ROI should be easy from there.

Using the example for revenue two (recurring products): SEO generated about $900 000 in revenue at the end of the year after 15 sales per month.

Assuming this company invests about $5000 a month in SEO. For a year, it would have invested about 12 x $5000 = $60 000. 

So, to calculate the SEO ROI:

(($900, 000 – $60, 000)/60000) *100 = 1400%. 

The Different Types of SEO ROI You Can Measure

Revenue is your ultimate ROI, but other ROI or key metrics are just as important. 

Never forget how multifaceted SEO is, and here are the other different key metrics, other than profits, that you can measure for ROI:

  • Rankings: Learn to measure your ranking for new keywords, and most importantly, positional improvements for existing ones. 
  • Brand Sentiment: The percentage of positive, negative, and neutral listings in the top 10, 20, and 100 search results. 
  • Increased SERP: Define your competitive set. Measure your rankings, and then multiply it by the Click-through rate of each position to determine the estimated traffic totals. 
  • Lower Acquisition Cost: Your overall organic traffic versus SEO cost
  • Authority: This is where you track your number of backlinks and traffic improvements coming in through related keywords. 
  • Funnel Progression: Your keyword performance categorised at the different conversion stages (Awareness, Interest, Consideration, and Decision) to understand their movement in your sales funnel. 
  • Conversion Rates: Assign a dollar value to the soft conversions to develop a revenue figure that you can run against your SEO cost. 
  • Revenue: This is where you measure your actual revenue. You assign a monetary value to each conversion. Alternatively, you may use an average order value. Next, multiply your number of conversions by this value to get an estimate of your revenue. 

How Long Should You Wait Before You Start Tracking Your SEO ROI?

This is a million-dollar question. 

Done right, you should be able to see improvements in your organic traffic and rankings within six months. 

But the real truth is that you’ll start noticing the improvements much earlier – sometimes in about a week or two of running the campaigns. 

This may not directly reflect in your traffic or revenue flow. Assuming you’re ranking at #60 for a high-priority keyword, and then after a few weeks, your ranking improves to position #30. 

That’s a good sign that search engines are slowly beginning to understand your page’s quality and usefulness compared to your SERP competitors. 

Keep in mind that not all traffic translates to improved revenue. But with time, as the traffic continues to flow, you may start to notice improvements in your revenue stream. 

For a more accurate picture, you need to look at your traffic and revenue improvements for an extended period (think two to five years). By focusing on longer timeframes, you should be able to see how your SEO efforts are lifting all ships, resulting in better traffic, ranking, and revenue on a broader scale.

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And that’s how you can best calculate your SEO ROI.  

Link Building ROI

Where you do not want to look at SEO as a whole, you can focus on one of its key components, Link Building.

Nothing has changed. ROI is still a function of two variables – costs and profits. It’s what remains after you’ve deducted your costs from profits – or should we call it net profits.

After you spend $500 on a campaign and it ends up generating $700 in revenue, then $200 is your revenue. Alternatively, we could calculate it as a percentage. So, it becomes 200/500 x100 = 40%.

How to Calculate Your Link Building Cost

The Link Building Cost of Working with an Agency

This is much easier if you’re working with a link building agency. Whether you’re paying for each link or a set of them, the calculations are still not complicated. 

You don’t need to dig deeper to find out how much time, money, and effort the agency used on each link. 

Another benefit of working with a link building agency is that they calculate your ROI for you (at least with some of the agencies). Remember, you’re not just working with link building experts but experts who are so invested in your success and growth. 

They would want to know how the links perform or which one of them performs best if they’re going to replicate the same link building strategy in the future. 

The Link building Cost of Building Your Own Links

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Link building isn’t a reserve of digital marketing experts only. If anything, it’s possible to learn some of the link building strategies and get your hands dirty by doing it yourself.

However, that’s not to say a DIY link building approach will cut your cost to zero. There are costs to incur, and here are some of the variables that contribute to directly that cost: 

Link Building Variables that Contribute to the Cost

Publisher Outreach: How long will it take you to find a new publishing opportunity? You need to find the editor’s contact details and reach out to them with the idea you have. You have to factor in both the time and cost of doing all this. 

Content Writing: How long will it take you to write a new article from scratch? Do you even have the skill for it, or will you be hiring someone to help you out?

Editorial Processing: The article you wrote is not complete until you get an editor to polish it through and perfect it for publication. This comes as an extra cost when you come to think about it. 

The point is to track how much you spend on each of these three variables. Where applicable, be sure to multiple it by the hourly rates you’re earning or paying. Remember that time is money. So, you want also to factor that in your calculations.

In the end, you want to calculate the cost of one link and then use it to determine the entire campaign’s cost. 

Google Analytics for Link-building ROI

What value are your links bringing to your campaign? Keep in mind that the value you’re getting from link building stretches far beyond search engine rankings.

One of the best tools to help you out with link building is Google Analytics. The tool is not only incredibly robust and free but also easy to learn.

So, if you haven’t set it up, consider doing it before you proceed with anything else. 

The million-dollar question here is, what metrics should you track? 

Well, you can start by visiting the acquisition tab. On the left-hand side of your Google Analytics dashboard, click on Acquisition, and you’ll be directed to an Overview page that breaks down every you need to know about how your site attracts its traffic. 

Here are a few relevant link building categories that you may want to direct your attention to:

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Organic Traffic: Organic traffic is the free traffic you attract from search results. For example, suppose you manage to rank in the top ten search results for a number of different relevant keywords, garnering about 10, 000 impressions and about 3, 000 clicks. In that case, that translates to about 3 000 organic visits. Organic traffic is a by-product of your SEO effort, including your onsite content, technical SEO, and, most importantly, link building.  

Referral Traffic: Referral traffic refers to the traffic you generate via the links that point back to your website. Users have the option of clicking these links to check out your site content or blog. Once they do, they’re considered part of your referral channel. 

Social Traffic: Social traffic isn’t part of your link building efforts, but it is part of your overall online marketing campaign. Another way to look at is when one of your site’s content goes viral and attracts thousands of social media shares. That may result in a surge of traffic, which makes it one of the things to consider in your ROI analysis. 

Pay attention to these categories and, most importantly, how their traffic compares to each other. There’s a pie chart to help you out with this.

You’re also allowed to click on each category for a detailed breakdown of the traffic. For instance, by clicking on referral, you should be able to see the number of people visiting from each of the referring domains. 

You should be able to see which landing pages users went to, and so on. The same applies to the rest of the sections. 

Other Link Building Metrics to Track

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Traffic isn’t the only thing you can track on Google Analytics. In as much as traffic is one of the key things driving your link building campaign, there are several other key metrics to also want to direct your attention towards.

These metrics include:

Goal Completion: Goals refers to the specific action you want your users to complete on your site. Whether it’s filling out a form or going through with a purchase, there has to be that one specific course of action you want them to take. 

To create a new goal on Google Analytics, just head to “Admin menu” and click on “Goal.” Now go ahead and click on New Goal and proceed to create one. 

If you’re not sure about what you’re doing, we suggest you go with one of the existing goal templates. 

After you’ve created your Goals, you can also go to the Goals submenu (under the conversion tab) to determine how they’re performing overall. You’ll also be provided with a goal completion rate under each traffic segment. 

This is useful when determining the real value of each traffic segment. For example, assuming you have 1000 people visiting your site from a link, you have on a high-profile website. If your goal completion rate is 2%, then that means you’ll be getting about 20 new leads per month from this particular link. 

Now, with some little bit of calculation, taking into account the value of one customer and the close rate, you can easily calculate the ROI generated by this one particular link. 

Time Spent on Your Pages: Your business with SEO or link building doesn’t just end with traffic, you also have to look into the quality of your pages or content. How much time are your users spending on your site?

How long does the users spend on a particular page before opening another page or entirely leaving your website?

More extended periods may hint at something good. It can be interpreted as a good sign that your content is engaging. 

Users are more likely to spend more time on your pages should you give them what they’re looking for. 

Bounce Rate/Exit Rate: Be sure also to check your bounce and exit rate. If anything, they signal the value of your website or the traffic you’re getting. If almost all the users you’re getting are bouncing off, then that could be a good sign that the link isn’t directing the right group of users to your site or your site isn’t all it’s cracked to be. 

Bounce rate refers to the number of people who visited your site and left almost immediately. On the other hand, the exit rate refers to the number of people who left your site after opening only one page or didn’t bother to check out any other page. 

New Visits: You also have to check Google Analytics for new visits. New visits are important because they signal additional value. It means your business is exposed to a new audience.

Together, these metrics will give you some perspective on the performance of your campaign. How many people are attracted to your site courtesy of the links you have? How many of them are staying and for how long? And most importantly, are they converting? 

7 Simple High-ROI SEO Tactics You Can Adopt Today

Now that you know how to calculate your SEO ROI, how about we help you figure out how to improve it. 

We’ve identified a few tactics that you may use to improve your SEO ROI:

Cross Link Your Blog Posts

Linking to your most popular blog posts using keywords you’d want to rank for will help you propel your rankings in the SERPs. 

Have your pages link to each other, and you’d be halfway there, especially if you have so many posts on your blog. 

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Featured Snippets

Featured snippets are the large boxes that pop up in Google’s results pages when you Google something. Here’s a comprehensive Guide on how to rank for Google Snippets in Singapore.  

Optimise Your Title Tags

SEO can be complicated. 

It also requires perfection. Just getting your site to position #1 in the SERPs isn’t enough. You have to go the extra mile by enticing online users enough to want to click on the links.

Here’s an example of how this works:

Hypothetically, you have managed to get your page to the number one spot of Google results. You have worked for this, creating excellent and all that just to get to this spot. 

But now, a competitor comes with subpar content and manages to get their site or blog to position #2. Their content isn’t as good as yours. But they have optimised their title, and now everyone is skipping your content for theirs. 

What will Google interpret this? 

Page Scrap

This is another excellent SEO tactic that you can adopt today and propel some of your pages to the first page or even first position.

You can start by visiting Google Search Console to look for the keywords you wish to rank. Assuming you’re ranking on the second page of SERPs on some of these keywords, or you’re on the cusp of making it to page #1. 

You can now use link building and cross-linking or even work on your title tags to improve your ranking and CTR by securing a better SERPs position.

Learn to Write Epic Blog Posts

If you check out our MediaOne blog, you must have noticed that most of our blog posts are super long (between 2000 and 4000 words, and even 6000 words?

Why?

Because the more keywords we have on a page, the more we’ll be able to rank for longtail keywords. 

Transcribe Your Videos

If you produce many videos, then you might want to consider transcribing these videos.

The reason being, search engines can’t crawl videos, but they can crawl transcribed text and reward you with a higher ranking. 

You can use Rev and other transcribing tools for this, where the transcriptions go for as little as $1. 

Performance

This is where you test your website for anomalies. 

It goes beyond loading your website on your laptop or phone. Remember, not all users have high-speed internet.

Keep in mind that more than 60% of your users will be accessing your website from a mobile phone. For this, you want to pick the cheapest smartphone you can find and use it to test your website’s performance. 

As a matter of fact, you should test it across a range of devices, and most importantly, use various online tools to test it for speed and other vital elements.

Author Bio

Tom Koh is widely recognised as a leading SEO consultant in Asia who has worked to transform the online visibility of the leading organisations such as SingTel, Capitaland, Maybank, P&G, WWF, etc. Recently he was instrumental in consulting for a New York-based US$30B fund in an US$4Bn acquisition. Tom is a Computational Science graduate of the National University of Singapore. In his free time he performs pro-bono community work and traveling.
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