How to Calculate SEO ROI (and Measure Your Investment)

---

SEO ROI is like the return on investment for real estate. Let me explain…

Buying a house is a lengthy process. And, when you purchase a house, it doesn’t increase in value the next day or week or month. However, over time, it may be one of the best investments you make. Even factoring in maintenance and upkeep costs, you’ll probably see sizable returns.

On the other hand, paid media is like renting an apartment. If you need a place to live right away, you can probably move in fairly quickly. However, your monthly payment will never deliver a positive ROI beyond the month you made the payment. The longer you rent, the more money you spend without any financial appreciation over time. Make sense?

So why do most marketing strategies prioritize PPC over SEO?

It’s because marketers don’t know how to measure ROI on SEO compared with other marketing channels. As a result, it often gets a smaller slice of the marketing budget. Don’t make that mistake. Your SEO investment has the potential to outperform all other digital marketing channels

Of course, the value of SEO depends on a variety of factors. But, for reference, Terakeet clients see average ROI on SEO like this:

SEO ROI statistics

In fact, even Google itself states the ROI on organic search is 5.3x compared to only 2x for paid search. Terakeet delivers ROI as high as 12.2x and reduces customer acquisition costs by 87.41%.

Next, we’ll dig into how SEO produces a return on investment. If you want to skip ahead, you can jump right to one of these sections:

• Ways to calculate the ROI of SEO
• How long does it take to see results?

How SEO produces ROI

About half of all web traffic comes from users who clicked on organic results. So right off the bat, the websites that rank well are swimming in a pretty nice pool called “half the market share of the entire internet.”

This organic traffic is roughly 5X higher than from paid search and 10X higher than from social media. So, any website that performs well organically will produce stronger marketing ROI than those that rely on paid search or social media.

Capture organic search market share

Organic search still dominates the search engine results pages (Google SERPs). According to statistics from Advanced Web Ranking, organic listings earn more than 77% of all desktop clicks.

Capture overall market share

Don’t look at the ROI of your SEO campaigns through a keyhole. Too often marketers ignore how search engine optimization (SEO) impacts overall share in the market (not just click share in the SERPs).

CEOs increasingly discuss their SEO strategy during quarterly earnings calls, understanding how organic search impacts the business overall. For example, Cars.com often attributes increased lead generation and financial results to its SEO marketing efforts when talking with investors.

Terakeet helped a disruptive home goods brand achieve a 340,000+ monthly increase in organic traffic through our SEO services. As a result, the brand quickly rose from zero to 3% market share in a $29 billion dollar industry.

SEO return on investment is more than just rankings. It’s about moving the needle for one’s business, including SERP click share and overall market share.

Increase website traffic

When you use the SERP share measurements alone, you can calculate the website traffic increase you can expect by improving your rankings for existing keywords.

An equally important payoff comes from the untapped traffic your brand doesn’t get yet. SEO ROI isn’t just dependent on boosting what’s already on page two or three. It also depends on capitalizing on the opportunities you’re currently missing.

• Does your target audience search in a certain way and your current pages aren’t addressing those queries?
• Are you missing out on high-volume, high-opportunity topics and keywords?
• Is your SEO program missing key stages in the purchase funnel (ToFu, Mofu, Bofu)?
• Could you boost your website’s sustainable, incremental traffic by targeting a few additional long-tail keywords with each piece of content you produce?

Increased website traffic is one of the easiest forms of SEO ROI you can demonstrate to your C-Suite. As an example, the following are all actual organic traffic gains recently achieved for our clients:

Decreased bounce rates

Of course, you don’t want just any traffic. You want qualified visits from your target audience. If you create content for the wrong audience, you might end up with a sky-high bounce rate.

If you’ve noticed that pattern on your site, I suggest you take steps to reduce your bounce rate ASAP. Here’s the Here are a few tips from that article:

• Strategically select the queries your target audience searches
• Match their search intent for every query
• Create the most helpful content for these queries
• Provide the best user experience beyond the actual content

Capture traffic from the people who actually need your content and with whom your content will resonate most deeply. And as their interest peaks, they’ll explore more pages on your site and continue on the customer journey.

When that happens, you no longer have just a visitor. You have a prospective customer. And that’s just one of the many benefits of content marketing.

Increased conversion rates

SEO-first content marketing allows you to target new customers at each stage of the purchase funnel. By aligning content with search intent, you can deliver incredible experiences that increase engagement. As a result, you’ll earn more conversions and build your pipeline.

Compare this to the out-of-sync timing of a TV, magazine or display ad. Can you see how SEO delivers higher conversion rates?

Want even more ecommerce conversions?

Combining SEO with a positive user experience (UX) translates into a powerful one-two punch, further increasing your conversions. Forrester Research found that optimizing the UX of web pages increases the conversion rate by 200%.

Conversions don’t have to focus solely on transactions, either. Depending on the length of your conversion funnel and how your customers convert, you can set other conversion goals that strengthen brand loyalty, focus on nurturing or send high-quality leads to your sales team. Examples include:

Increased revenue

The upshot is more revenue. This is true whether your user converts as soon as they hit the checkout button or whether they spend more time getting to know your brand, talking with your salespeople and converting later.

Over the long-term, though, you’ll be able to calculate an ROI on your SEO program by also incorporating traffic results from those keywords at the top of the sales funnel, priming your business for future sales. With this in mind, it’s important to factor in not only revenue, but also lead quality scores from traffic higher in the funnel in your ROI calculations.

Reduced customer acquisition cost (CAC)

With SEO, you can often acquire new qualified traffic and customers at a mere fraction of the cost of paid search. In fact, Terakeet typically achieves acquisitions up to 30% that of paid search for our clients. Better ROI through SEO means improved margins and increased revenue.

Ironically, CMOs allocate millions of dollars to paid search because the correlation between investment and return are immediately clear. The acquisition cost, though, can be sky high. As a result, profit margins shrink and budgets are devoured.

Unfortunately, when you stop paying, you stop playing. There are no long-term gains from a PPC campaign. You have to constantly feed the beast or your traffic and customer acquisitions literally go to zero. In comparison, SEO is a flywheel that keeps providing returns.

What’s worse, many ecommerce brands ignore top-of-the-funnel acquisition due to the costs of the Google Adwords model for those keywords. That means they aren’t present when customers are researching options.

That doesn’t mean you should choose SEO over paid search in all cases. But, you should know how to calculate customer acquisition cost and compare them across segments. A typical CAC is tightly time-bound and linear. If you factor in the much longer timeframe for returns and the new prospects brought into the awareness funnel from SEO, you’re looking at an even lower actual CAC for SEO initiatives.

Greater customer lifetime value (CLV)

According to a commissioned study by Forrester Consulting, customers acquired through SEO are more loyal, leading to greater customer lifetime value (CLV). SEO focuses on user experience, engagement, alignment and delivering long-term value. Although organic conversions take longer, brands must find a balance between fast results and loyalty.

Read the full study here.

Strengthened brand equity and reputation

A holistic approach to SEO also has many branding benefits. SEO helps you:

• Find the right people
• Match their search intent
• Build relevant pages and create genuinely useful content
• Answer their questions
• Build a trusted brand
• Establish expertise and authority in a subject or industry
• Strengthen your brand’s presence in the SERPs
• Solidify results for your branded terms
• Get people to talk about your brand and share your content
• Establish a content strategy that supports link building
• Be a brand that others want to link to in general
• Guide visitors to the actions that matter most
• Make sure your happy customers leave great reviews

All of this adds up to strengthened brand reputation.

Through online reputation management, enterprise companies can rebuild their search profiles to showcase positive brand sentiment. In addition brands can immunize against future threats and recover more quickly from a crisis. Integrating SEO and public relations extends the visibility of PR placements, increasing ROI even further.

Curating a positive online reputation is big business. A study by the World Economic Forum found that approximately 25% of a company’s market value is directly attributable to its reputation.

Further, negative brand search results can scare off potential customers as well as existing relationships. As a result, your business could lose millions of dollars in revenue and

A case in point is a national furniture retailer for whom we engaged in reputation management. Terakeet flipped Google page one for brand terms to 100% positive results. This increased  click-through-rates (CTR) on positive articles for branded “review” searches by 456%. The client subsequently recovered $32.7 million in monthly revenue.

How to calculate SEO ROI

How do you measure SEO ROI? Well, you could use a very simple SEO ROI formula like this:

{revenue from organic traffic} – {cost of SEO} / {cost of SEO}

Using that formula, let’s plug in some numbers. Say you spend $100,000 per month on SEO, and as your revenue from organic traffic is $500,000.

($500k – $100k) / $100k = $400k

According to the above formula for SEO ROI, your return on investment would be 4X, or 400 percent. However, there’s one big problem with that formula. It assumes that every dollar you spend will return to you in the same time period.

If you know anything about SEO, you probably understand that it takes time to impact rankings and traffic. Consequently, the dollars you invest now may not start producing a return for several months, or even as long as a year if your website needs a lot of initial technical SEO work or link building.

So, to solve that issue, I’ll explain several different methods for how to measure SEO ROI in the next section.

Determine the types of ROI you’ll measure

Revenue might be your ultimate goal, but the value of SEO is more multifaceted. Tie incremental indicators directly to a KPI so you can more effectively communicate ROI across the enterprise. For example:

• Rankings: Measure rankings for new SEO keywords, as well as positional improvements for existing search terms.
• Brand sentiment: Measure the percentage of positive, neutral and negative listings in the top 10, 20 or 100 search results.
• Increased SERP share of voice: Define a competitive set, and measure rankings multiplied by the CTR of each position to calculate estimated traffic totals.
• Lower acquisition cost: Measure your overall organic traffic numbers vs. the cost of your SEO program.
• Authority: Track the number of backlinks and the increase in Domain Authority or Domain Rating.
• Funnel progression: Track performance of keywords categorized by stage (Awareness, Consideration, Decision) to understand movement at a high level. On a micro level, you can also track onsite funnels with behavior analysis tools.
• Conversion rates: Assign a monetary goal value to soft conversions in Google analytics. This allows you to measure your SEO cost against other channels within your multi-touch attribution model.
• Revenue: Measure actual revenue through ecommerce tracking and calculate the associated CAC. Assign a dollar value to each conversion, or use the average order value. Then, multiply your the number of conversions from organic traffic by the value of each conversion.

SEO metrics: tracking and reporting

There many SEO metrics to measure success, so monitoring can be overwhelming. Fortunately, there are plenty of dashboard-based reporting tools to stay organized, including Google Data Studio, Klipfolio, Grow or DashThis.

Use these key performance indicators (KPIs) and metrics to track SEO ROI for organic search traffic:

• Priority keyword rankings
• Total traffic
• Organic traffic as a percent of total traffic
• Desktop vs. tablet vs. mobile traffic
• Traffic from different regions
• New vs. returning visitors
• Search Console impressions: How many people saw you in the SERPs?
• Total traffic from all mediums
• Traffic from keywords related to a specific topic or initiative
• Bounce rate by page and traffic source
• Conversions and conversion rate
• Soft conversions from downloadables and subscriptions
• Organic revenue and assisted revenue

Reviewing your month-over-month stats is vital so that you can notice what’s working (or not) and adjust your SEO program moving forward. Year-over-year performance is just as important to track for understanding the true, longer-term ROI of your SEO efforts. Track this on a monthly basis, too.

How long does it take to see SEO ROI?

The literal million-dollar question.

With the right approach, you can expect to see organic rankings and traffic improvements within six months. But the reality is, you’ll start to notice movement much earlier than that – sometimes even within a week or two of implementation.

It may not translate to traffic or revenue immediately, but if you start ranking at #58 for a high-priority keyword and a few weeks later you’ve bumped up to #30, that’s a sign that Google is slowly starting to understand the page’s quality and usefulness relative to its SERP competitors.

And of course, not all visitors convert But, over time, a sufficient number of users will. Therefore, you should be able to see traffic and revenue improvements quarter to quarter, or year to year with seasonal businesses.

If you want a truer picture of your SEO ROI, look at the traffic and revenue increases over two or three years. With a longer timeframe, you’ll be able to see how your rising tide in SEO performance is lifting all ships, resulting in greater rankings, traffic and revenue performance more broadly.

And that’s the best calculation of all!