Home » Search Engine Optimization » SEO ROI: how to calculate the value of organic traffic

SEO ROI: how to calculate the value of organic traffic

Strategy, Search Engine Optimization

12 minutes for reading

How to Calculate SEO ROI

Calculating the SEO ROI is generally seen as a myth by companies and even by agencies and consultants. Unlike sponsored link campaigns (PPC), analytics tools do not provide enough data for us to directly assess the ROI (return on investment) of an SEO (search engine optimization) campaign. Still, we can estimate with some precision the return on investment in SEO.

In this article I will bring considerations that companies should make when investing in SEO and how we can calculate the ROI of SEO campaigns.

Why invest in SEO?

Is your target audience online?

Most people use searches as a gateway to their web browsing. In 2019, Google alone accounted for 3.8 million searches per minute.

We should no longer ask if your company's target audience is connected or if you use any search engine. The answer for both is obvious: a big yes! The question we must ask is: What are people looking for? What terms are you using in your searches? Do I offer the products or services they are looking for?

Do your competitors invest in SEO?

The next question you should ask yourself is whether your competitors invest in SEO. If they invest, it will not be very smart of you not to invest. If they do not invest, it may be a good opportunity to take the lead in the market by investing in SEO.

See which sites appear in searches for products similar to yours. Would you like to appear in these results as well?

There are hundreds of millions of sites worldwide looking for positioning on the first page of searches. How many of these are already investing in SEO? If you think you can get to the first page of Google without a good SEO strategy, you are very wrong.

What would happen if you stopped investing in advertising?

Many companies invest in PPC (pay per click), sponsored links. The results with PPC campaigns are almost immediate and it is possible to have a good view of the return on the amount invested. Tell me, what would happen if you stopped investing in sponsored links? Would you leave the search results completely?

SEO is a long-term investment but once you invest in it, it's yours. PPC and social networks are "rented". Obviously, it takes maintenance of the SEO strategy, but the work you do now can yield results for a long time.

SEO and PPC are complementary and I mentioned this in an article entitled “SEO and PPC: combining for better results“.

“SEO takes too long to work”

This is one of the most frequent objections to SEO. Yes! SEO takes time to deliver results.

Good results usually begin to appear in three to six months. For more popular niches and terms, this time may be even longer. Short-term results are only obtained if they are corrections of gross errors, some penalty or a very bad technical structure.

How much to invest in SEO and what will be the result?

This is a question that depends a lot on the segment in which your company is inserted and on how long you expect to beat your competition. Generally, companies should allocate from 5% to 10% of their SEO revenue, as an advertising cost. This is far from happening in many companies, which barely allocate this percentage to all of their marketing actions.

It is important that companies know the role of SEO within their marketing strategy. In most cases it will be a traffic generation strategy, covering top and middle funnel content. Companies should not expect, although it is possible, visits from organic search to have conversion rates as high as PPC campaigns.

Still, it is necessary to look at the whole. While organic search may not be a channel for conversion (last click) it helps a lot with conversions from other channels. In other cases, SEO may not generate traffic increase, but qualification, leading to better conversion rates.

How to calculate SEO ROI?

The formula for calculating SEO ROI is the same as for any other investment:

ROI = [(Return - Investment) / Investment] * 100

We need two pieces of information:

  • The investment (how much we spend on a given campaign);
  • The return (how much we earn from the same campaign).

The first part is relatively easy to obtain. Basically it will be the value of your investment in an agency, SEO consultant or internal SEO team. Let's focus on the second variable, the return.

Let's follow some steps to get the return and be able to calculate the SEO ROI:

1. Estimate the volume of organic search traffic for your keywords

Do a comprehensive search of keywords you want to rank for. This research can be done using several tools. I particularly like to use SEMrush but you can also use the Google Ads word planner, Ahrefs or another tool of your choice.

If possible, use a tool capable of estimating the approximate value of the CPC, since we will use it in one of the methods in step 3.

2. Find your CTR by position in organic search

Now that we have the keywords we want to rank for and their respective search volumes, let's go after the CTR to estimate traffic.

If you use any BI tool or already have an SEO consultancy, you can elaborate something more refined. Ideally, evaluate the CTR for brand-related terms (branded) and not related to the brand (non-branded) separately.

When estimating a future position, be realistic. There are highly competitive terms that no matter how much you invest, you can never take the first position. If you prefer, work with positioning bands. For example: 8th to 10th position is a regular scenario, 4th to 7th position is a good scenario and 1st to 3rd position is excellent.

If you have no idea what your website's CTR is by positioning in searches, use a benchmark like the one provided by Advanced Web Ranking staff. Every month they offer a benchmark that can be very useful in these estimates.

CTR by position in organic search
CTR by position in organic search (desktop 09/2020). Source.

3. Discover the value of your visits

This is one of the most complicated parts. We can estimate the value of visits mainly through two methods: using the CPC (coarse method for less refined calculations) or observing the actual value of each conversion.

CPC Method

As I mentioned earlier this method is more crude but is still useful for some quick calculations when you want to show the value of your SEO investment.

This method basically consists of using the CPC value, obtained from our keyword research (step 1), and multiplying it by the traffic generated (reactive) or estimated traffic (predictive) to obtain the value of your visits.

Let's say you are looking to determine the value of your visits for the “term x” and it has a CPC of $ 2.00 and generates a traffic of 2,000 visits, we will have:

KeywordTrafficCPC ($)Traffic Value ($)
term x2.0002,004.000

This means that if you are able to rank in a given position, your organic traffic may be worth $ 4,000 / month or $ 48,000 / year. This would be the amount you would stop investing in ads, for example.

I repeat, this method is crude because it only takes into account the traffic generated and not the actual value of the keywords for the business. That's where the “real conversion value” method comes in.

“Actual conversion value” method

To use this method we will need two pieces of information:

  • Conversion rate of landing pages;
  • Average ticket.

With these numbers, we will calculate the average value of each visit:

Value per visit = Conversion rate * Average ticket

Through this method you can identify specific landing pages for key terms you want to rank.

Conversion rate per landing page
Conversion rate per landing page. Source: Google Analytics

In the image above, we see that a given page has a conversion rate of 2,48% for traffic coming from Google search. Assuming that the average ticket for conversions in our example is $ 100, we will have a value per visit of $ 2.48 (Value per visit = 0.0248 * 100 = 2.48).

Two important points:

  1. I'm simplifying to exemplify. In general, we will have multiple terms triggering a landing page and therefore our analysis should be more detailed as to the attribution of value to the keywords of an SEO campaign;
  2. In the example I used conversions that are not from an e-commerce but you can do the same procedure using data from an e-commerce. It is important to note that for this type of analysis you must have the conversion values properly registered in your Google Analytics.

4. Estimate traffic and revenue based on search volume

Ok, we already have our monthly search volume (step 1), the CTR by position in the searches (step 2) and the value of each visit (step 3). Now let's calculate the traffic and revenue estimate.

For this we will use:

Estimated value of generated traffic = Total searches for the term * CTR * Visit value

Supposing that we are going to calculate the traffic and revenue estimate for a term that we managed to rank in the first position of the searches. We have:

  • Monthly searches: 2,000
  • First position CTR: 35%
  • Visit fee: $ 100

We have:

Estimated value of generated traffic = 2,000 * 0.35 * 100

This brings us to $ 70,000 per month.

5. Calculate the SEO ROI

We can now calculate the ROI of our SEO campaign. For that, we just use the information obtained previously and the investment in SEO.

Using our previous example, let's say the company hired an SEO agency for $ 20,000 / month. We have:

  • Return obtained = $ 70,000
  • Investment = $ 20,000

So:

ROI = [(Return - Investment) / Investment] * 100

ROI = [(70,000 - 20,000) / 20,000] x 100

ROI = 250%

A good return on your investment.

If you want to annualize this analysis, be sure to work with indicators (CTR, conversion rate, average ticket, etc.) that match.

Overview

In this article we saw why it is important to invest in SEO and how it is possible to calculate the ROI of an SEO campaign.

To recap:

Necessary time: 3 hours.

How to Calculate SEO ROI

  1. Estimate the volume of organic search traffic for your keywords

    Do keyword research by collecting information on estimated search volume and CPC.

  2. Find your CTR by position in organic search

    If you are able to evaluate the CTR in the organic search for your business. Try to analyze terms branded and non-branded separately. If you have no idea what your website's CTR is by positioning in searches, use a benchmark like the one provided by Advanced Web Ranking.

  3. Discover the value of your visits

    We can estimate the value of visits using two methods: using the CPC (coarse method for less refined calculations) or observing the actual value of each conversion.

    CPC Method: Use the CPC value obtained from keyword research (step 1), and multiply it by the traffic generated (reactive) or estimated traffic (predictive) to get the value of your visits.

    “Actual conversion value” method: Find the conversion rate for your pages and your average ticket. Then, calculate the average value of each visit using:

    Value per visit = Conversion rate * Average ticket

  4. Estimate traffic and revenue based on search volume

    Once we have the information described in the previous steps, we can calculate traffic and revenue based on search volume.

    Estimated value of generated traffic = Total searches for the term * CTR * Visit value

  5. Calculate SEO ROI

    Once we have return data (obtained in the previous steps) and investment we can calculate the SEO ROI using the formula:

    ROI = [(Return - Investment) / Investment] * 100

Remember: well-structured SEO actions tend to gain more relevance over time. Many companies experience exponential growth rates in SEO ROI over the years.

About the author

Free tips to optimize your website!
  • Get weekly tips on SEO, analytics and WordPress.
  • Digital strategies and insights to improve your conversions.
Menu