SEO ROI: how to calculate the value of organic traffic

Calculating SEO ROI is often viewed as a myth by companies and even agencies and consultants. Unlike for sponsored link (PPC) campaigns, analytics tools do not provide enough data for us to directly evaluate the ROI 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 you considerations that companies should make about 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 search as the gateway to their web surfing. In 2019, Google alone counted 3.8 million searches per minute.

We should no longer ask if your company’s target audience is connected or uses any search engines. The answer to 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 is whether your competitors invest in SEO. If they invest, it won’t be very smart of them not to invest. If they do not invest, it may be a good opportunity to take the lead in the market by starting to invest in SEO.

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

There are hundreds of millions of websites around the world in search of first page positioning. How many of these are already investing in SEO? If you think you can reach 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 get a good view of the return on investment. Tell me, what would happen if you stopped investing in sponsored links? Would you drop out of search results completely?

SEO is a long-term investment but once you invest in it, it is yours. PPC and social media are “rented”. Of course it takes maintenance of the SEO strategy, but the work you do now can generate results for a long time.

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

“SEO takes too long to yield results”

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

Good results usually start to show in three to six months. For more crowded niches and terms this time can be even longer. Short-term results are only obtained if they are corrections of gross errors, some penalties, or a very bad technical structure.

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

This is a question that depends a lot on what segment your company is in and how soon you expect to outperform your competition. In general, companies should allocate 5% to 10% of their revenue to SEO, as an advertising cost. This is far from the case in many companies, which barely allocate this percentage for all their marketing actions.

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

Still you have to look at the whole. Although 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 increased traffic but rather qualification, leading to better conversion rates.

How to Calculate ROI for SEO?

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 certain campaign);
• The return (how much we earn with 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 in-house SEO team. Let’s focus on the second variable, the return.

Let’s follow a few steps to get the return and be able to calculate the ROI of SEO:

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

Do a comprehensive research of keywords for which you want to rank. 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 that can estimate the approximate value of the CPC, since we will use it in one of the methods in step 3.

2. Find your CTR per position in organic search

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

If you use a BI tool or already have an SEO consultant you can do something more refined. Ideally, you should evaluate the CTR ofbranded andnon-branded terms separately.

When it comes to estimating a future positioning, be realistic. There are highly competitive terms that no matter how much you invest you may 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 site’s CTR is by search placement, use a benchmark such as the one provided by the folks at Advanced Web Ranking. Every month they offer a benchmark that can be very helpful in these estimates.

3. Discover the value of your visits

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

CPC Method

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

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

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

This means that if you manage to rank in a given position your organic traffic could be worth $4,000/month or $48,000/year. This would be the amount you would no longer invest in ads, for example.

I repeat, this method is crude because it only takes into account the traffic generated and not the real value of the keywords to the business. This is where the “actual 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.

In possession of 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 that you want to rank for.

In the image above, we see that a certain page has a conversion rate of 2.48% for traffic coming from Google search. Assuming that the average ticket of the 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 am simplifying for the sake of exemplification. In general we will have multiple terms triggering a landing page and therefore our analysis should be more thorough in assigning value to the keywords in an SEO campaign;
2. In the example I used non-e-commerce conversions, but you can do the same procedure using e-commerce data. It is important to stress 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

Okay, we already have our monthly search volume (step 1), the CTR per search position (step 2), and the value of each visit (step 3). Now let’s calculate the estimated traffic and revenue.

For this we will use:

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

Suppose we are going to calculate estimated traffic and revenue for a term that we manage to rank in the first position in searches. We have:

• Monthly searches: 2,000
• CTR of the first position: 35
• Value of the visit: $ 100

We have:

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

This brings us to $70,000 per month.

5. Calculate SEO ROI

Now we can calculate the ROI of our SEO campaign. To do this we just need to 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

Then:

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, make sure you work with consistent metrics (CTR, conversion rate, average ticket, etc.).

Summary

In this article we have seen why it is important to invest in SEO and how you can calculate the ROI of an SEO campaign.

To recap:

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