Increasing ROI Reporting & KPIs

ROI for SEO: How To Calculate ROI and Prove Value of SEO Initiatives

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What is ROI?

ROI, or “return on investment”, is a metric that is used in business to determine whether the money being spent on the business is generating profitable outcomes. This can also be used in deciding whether it is worthwhile to invest in a new initiative, or continue spending on an existing one.

In a marketing context, you’ll most often see ROI referenced when it comes to activities and channels that require significant upfront budget, like ad spend, media buys, or hiring an agency partner. Marketing ROI calculations will typically guide strategic decisions around where to spend department budgets and how much to spend on a given channel or initiative, as well as providing a KPI that can be used to evaluate performance. Many businesses will use related metrics like CAC (cost per acquisition) to determine ad spend strategy and make adjustments to achieve the lowest possible cost for the highest possible return.

Why ROI Matters for SEO

Despite the fact that SEO doesn’t utilize “spend” in the same way that other channels do, ROI is still an important metric for proving the value of an SEO initiative or program. Here are a few reasons:

  • Getting buy-in: Whether it’s because you need your boss’s signature on a budget request, or you’re trying to help a client understand why their monthly retainer is good value, being able to speak in terms of the ROI of the work they’re paying for will provide a basis to move forward with the investment. Many companies have budget approval processes that require some kind of ROI estimate to be able to proceed with the request.
  • Calculating what to invest in: There are so many ways that we can optimize our websites for search, and it’s not just about ticking every box. No one can do everything at the same time, and figuring out how to prioritize what you invest in is essential to a strong SEO strategy. By understanding the expected ROI for the various activities you’re considering, it can help you decide the best way to prioritize for optimal results.
  • Measuring success: A strong ROI metric ties SEO work directly to business outcomes (revenue, conversions, etc). This allows us to measure success more concretely in terms of what we’re achieving for the business, and to communicate performance to non-SEOs and non-marketers more easily. It can also help us to identify what’s not working more quickly. If we have calculated what we expect to see in terms of ROI within, say, 3 months, we’ll be able to see — and course correct — faster if an initiative is significantly underperforming.

The Challenges of Calculating ROI for SEO

ROI is fairly straightforward to calculate for paid channels like PPC or social advertising, because these platforms typically come with an attribution model that can determine how much was spent and how many conversions that drove. Paid advertising platforms and campaigns provide several data points, including CAC, reach, and conversion numbers, more granular campaign tracking options, and – with some exceptions – paid campaigns are often designed to drive more “bottom-of-funnel” traffic (e.g. traffic from people who are already considering a conversion and/or closer to a conversion in their customer journey).  

For organic channels like SEO, however, calculating ROI and successfully making a case for business investment into the SEO program can feel a lot more challenging. Without “ad spend per conversion” as an easily quantifiable metric for investment, costs and benefits of the program can be difficult to define and quantify. 

Sometimes companies think of SEO as “free traffic”, but this doesn’t account for the cost of the optimization work required to obtain that free traffic, nor further costs associated with more complex initiatives that might require technical support (like replatforming the website or migrating to a new domain), creative assets like copy / page content, or consulting support (whether for specific types of initiatives that require expertise, or outsourcing of execution). Without a clear “input < output” model, it can be difficult to make a business case for these resources. 

How To Think About — and Calculate — ROI for SEO

The good news is that there are some ways to approach this that can make it easier to prove the value of your work. 

Before getting too in-depth with calculations and metrics, there’s a few things to get clear about first:

  • Do you understand how the business makes money? ROI metrics can look different depending on your business model. For instance, a lead generation model might use the average lifetime value of a lead as the basic unit of measurement, whereas an ecommerce business would more likely use overall revenue.
  • Do you understand how your boss or client thinks about value? If they care more about increasing the number of customers, or building their email list, you might want to use a different conversion metric than if they care only about the total revenue.
  • Does everyone involved understand the limitations of ROI as a metric? It’s important to be clear in communicating about ROI that this should not be viewed as the be-all end-all way to understand and measure SEO value. It’s just one metric that can provide directional guidance, and focuses primarily on bottom-line value over top-of-funnel metrics like brand awareness, share of voice or search visibility.

Once you understand how the business makes money and what types of outcomes are most valuable, the next step is to figure out what type of calculations are best suited to your particular situation.

Measuring SEO Success and ROI

When you’re trying to measure or demonstrate the impact of the work you’ve done, it might seem like the simplest option to look at the basic numbers. Common SEO KPIs include traffic growth, ranking improvements, and organic conversion / conversion rates. These are all good things to track, but in order to show quantifiable impact on the business, you’ll need to find a way to tie top-of-funnel metrics like traffic to actual revenue numbers. 

The easiest way to do this is simply to take organic conversions as the primary metric, and the ROI calculation would be something like 

“$ spent on SEO / # of conversions = cost per conversion”

With this model, a positive ROI would simply mean that the cost per conversion is less than the value of that conversion. Unfortunately this can be a limiting approach because “organic conversions” are often identified using last-touch attribution (i.e., whatever channel the user converts on gets credit for the conversion, even if the user has visited the site previously on a different channel).

Organic initiatives typically focus on casting a wide net and ensuring that one’s brand shows up whenever a potential customer is searching for information. The nature of organic strategy typically relies on generating a high volume of top-of-funnel traffic, and metrics or KPIs can usually be tied more to brand visibility and awareness measures (rankings, search visibility, audience- or list-building) than they are to direct conversions.

Also, some SEO strategies (like using high-funnel search content to capture visitors for later retargeting) are designed to directly contribute to conversions which happen at a later stage of the customer’s journey, but that won’t show up as an “organic” conversion when using a last-touch attribution model. And realistically, your SEO strategy can impact the ROI of all your other marketing efforts

Unless a company has a robust multi-touch attribution model that enables you to understand which channels contributed to a given conversion, SEO will often appear to have a lower conversion rate than its paid counterparts. This can make the value of SEO appear lower than it actually is.

This doesn’t mean you can’t use this approach, but you may want to use it in conjunction with other data, and/or make sure you’re very clear about the limitations and assumptions upfront when you present forecasts based primarily on last-touch conversion data.

A more sophisticated approach is to assign value to specific actions (clicking on a certain link, viewing a certain page) and/or micro-conversions (like email signups, free downloads or form submissions). Based on the conversion rate data of users who’ve completed one or more of these steps versus those who haven’t, you can estimate the one-off value or even lifetime value (LTV) of these conversions, and assign that value to the action. 

When you understand the entire customer journey, and what steps a user typically takes before completing a transaction or conversion, you can develop a methodology for assigning value to higher-funnel behavior that you can then apply to the various actions or micro-conversions that happen on the website. For instance, if a typical visit has a 10% chance of coming back later to convert, but you discover that visits where a user looks at a product page actually come back later to convert 50% of the time, you might decide to assign product page visits a value that is proportionally higher than other pages. 

Does viewing a certain landing page correlate with a higher chance of that user later coming back and submitting their information? If so, getting traffic to that page may have more value than getting traffic to another page. So you might want to design a strategy based on driving better rankings and more backlinks to that page, and assign a higher “value” to visits that include that page.

Does downloading an info packet typically correlate to a higher chance of coming back later and purchasing the product? If so, then getting users to that info packet download is valuable, even if they don’t complete the purchase within the same visit, and you’ll want to be able to take credit for driving that value as an SEO win.

Once you know the quantifiable value of these actions or micro-conversions, you can also use analytics tools to help with ROI calculations. For example, if you’re a Google Analytics user, you can set up “goals” and ecommerce tracking for these actions and assign them a value directly in the platform to help you calculate the value of SEO

If you do have multi-touch attribution set up (even the basic version in Google Analytics), especially if you combine this with assigning values to actions and micro-conversions in the form of GA goals or similar, you’ll be able to get insight into how many last-touch conversions vs assisted conversions each channel drives.

This is especially important if you are using an SEO strategy which is designed to support paid campaigns directly, for example:

  • reducing ad spend for paid brand keywords due to strong organic brand rankings
  • running retargeting campaigns after driving organic traffic to particular content
  • generating brand awareness and authority building for relevant topics

The other way we can use ROI calculations is in developing opportunity estimates for getting buy-in and determining the best way to prioritize our planned initiatives.

Getting buy-in (internally or from a client)

Often in order to get buy-in, whether for internal budget, getting another team to prioritize our project, or when pitching an initiative to a client, we need to be able to provide an estimate of the expected ROI. One way to do this is with the simple conversion based calculation we discussed earlier.

For example, if 10,000 organic visits in a month drove 1000 conversions, that’s a 10% conversion rate. If we can increase our organic traffic to 20,000 organic visits and maintain the same conversion rate, the ROI on that initiative would double. As long as we don’t spend more than twice as much to get those extra visitors, there’s a positive ROI from this initiative.

While this is an acceptable method and can be useful when it comes to proposing a new initiative and trying to demonstrate opportunity, there are a few tricky things about this approach, because of the way SEO works. 

Firstly, are we only getting traffic to these same pages, or do we expect our initiative to drive traffic to other pages? If we don’t see the same conversion rate on every page, but we’re including those other visits in our estimate, our forecast will be skewed, because we could drive those extra visitors to a different page with a lower conversion rate. 

Second, how do we estimate the opportunity? Are there actually 10,000 more searches happening each month that are going to another website which we could capture if we rank better, or is that group of users already visiting us as much as they ever will? And even if that traffic is out there, is it qualified traffic that would allow us to maintain that current 10% conversion rate? 
These are some of the questions we need to make sure we answer when we’re creating an opportunity estimate. But by understanding the nuance of how SEO adds value at multiple touchpoints, and being able to explicitly state what assumptions are being made, you’ll be able to build a much stronger case. You can also use a tool like Botify’s Conversion Forecasts tool, which allows you to estimate the potential opportunity for improving SEO performance on a sitewide or page by page basis, based on the values you assign to certain pages or page types.

Initiative prioritization

ROI and opportunity estimates can also be a valuable tool in our own day-to-day work, when it comes to figuring out the best way to prioritize our projects (or decide what to outsource or automate). Prioritization frameworks typically look at a combination of impact vs effort/investment. The ROI calculation allows us to quantify the impact in a way that can be compared with effort or investment metrics (like budget or hours required).  

Using ROI to Build a Business Case for SEO

Once you’ve established the data points you’ll use for your ROI calculations, you can use this in several ways to help move your projects and initiatives forward:

  • To build a business case for an SEO initiative: you’ll be able to speak more confidently to the expected impact and value your initiative can drive, and provide a forecast of the expected impact on the business
  • To help with getting your SEO initiatives prioritized by other teams: you’ll be able to tie your project to shared metrics like revenue or LTV, to demonstrate how this work can help them hit their targets as well as yours
  • Building a business case for SEO tools: to figure out the possible impact of automating, outsourcing execution or otherwise reducing costs

Building a business case for adding resources: whether in the form of bringing in an agency / consultant, or adding headcount to your team, knowing the ROI allows you to demonstrate the investment in a monthly retainer or salary would be worthwhile based on the opportunity

The Easy Way to Calculate ROI? Let Botify Help

If you’re a Botify user, you’re already a step ahead when it comes to calculating ROI. Use the Conversion Forecasting tool to estimate the opportunity of SEO activities in revenue terms, and to help prioritize your efforts. 
You can also use other Botify reports to help you define your strategy to drive more conversions/revenue via SEO.

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