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How To Calculate ROI For SEO

14 November 2016 | 0 comments | Posted by Che Kohler in nichemarket Advice

How to track ROI for SEO

It is a question I've had to answer many times, a question plaguing so many business owners, management teams and stakeholders. It's a question I will continue to receive in future and a question that as complex as it may seem is pretty easy to answer.

How do I calculate return on investment for SEO?
Along with that question comes a few popular related questions
  • How do I know what SEO is worth to my business?
  • How can you justify the time, resources and cost involved?
  • What is an in-house SEO worth?
  • Is outsourcing my SEO more cost-effective?
Being an unanswered question for so long is why paid search has been such a crutch for many an online business. It doesn't take much thought to calculate your spend and revenue numbers from the channel and it's all neatly collected for you in a dashboard. That being said, I think it's time for SEO to answer for itself. I will attempt to answer all the questions above and more. So if you've been asking yourself any of these questions before, asked your management team, asked your search team and couldn't get a straight answer, I suggest you keep reading. Oh and before I begin, welcome to the Thunderdome.

Metrics you need to consider

So once you've made your changes to the site, on page optimisation, added unique content, rich keywords, and all that jazz its time to calculate its effects. For this example, we will assume 2015 had no SEO work done and 2016 did.
  • Branded traffic
  • Any SEO worth his salt will always begin in working on brand search term SERP dominance. It is a great place to start building consistent traffic. What you will need to do here look at your average monthly brand term growth before work so 2015 you're brand traffic grew by 10% while in 2016 it grew by 14%. Example:
    • 2015 my average organic brand traffic was growing at 10%
    • 2016 my average organic brand traffic is growing at 14%
    So you have a positive 4% uplift
    If you do above the line advertising this can get a bit tricky in removing those spikes.
  • Non-branded traffic
  • Non-branded traffic is a little easier since before SEO was done you were naturally competing for the same keywords. SEO would have made you more competitive for already targeted keywords and increased your reach to other keywords. So you would take your marginal growth, no growth or negative growth you're getting from non-branded terms as your base and subtract from the current growth rate. Example:
    • 2015 my average organic brand traffic was growing 5%
    • 2016 my average organic brand traffic is now growing at 30%
    So you have a 25% uplift in non-branded organic search traffic
  • Referral/inbound links
  • A solid SEO strategy cannot be executed without link building, keeping track of the new links that were built, the amount of traffic they brought in and conversions need to be factored into your calculations. Let us assume you received 8 new links, which resulted in 12 direct conversions and the value of referrals is R650 per conversion which resulted in R7800 additional revenue.
  • Conversions
  • This is where it gets a bit tricky since we cannot attribute one keyword to conversion. What we would do here is take the amount of uplift traffic
    • 4% of brand
    • 25% of non-brand
    Then calculate how many conversions that would be from the current conversion rate. So if you had a 2.12% conversion rate for organic
    • 4% brand = 300 sessions
    • 25% non-brand = 800 sessions
    You received roughly 23 additional conversions from work done on organic traffic
  • Revenue
  • Now you would take the average value of a conversion or in eCommerce the average value of purchase within that channel Example:
    • Average purchase on organic is R950
    • 23 conversions x R950 average basket value = R21 850
  • Assisted conversions
  • Take your previous years assisted conversions and add your average growth of that year and subtract it from the current assisted conversion growth. Example: Assisted organic conversions in 2015 was 130 + 10% = 143 Assisted organic conversions for 2016 is 222 So you have an uplift of 79 additional conversions. You can pull the assisted conversion value in the same way, let's say for this example it worked out to R12 500

Bringing it all together

Now once you have the value of:
  1. Revenue gains from brand
  2. Revenue gains from non-brand
  3. Revenue gains from new referral links
  4. Revenue gains from assisted conversions
Simply add all of those together and subtract your cost of investment and divide by cost of investment and there you have it. Final example:
  • Revenue from brand and non-brand = R21 850
  • Revenue from new referral links = R7800
  • Revenue from assisted conversions = R12 500
  • Total revenue = R42 1500
Say you spend R25 000 on SEO for that year which included
  • Dev cost
  • Front end design cost
  • SEO strategy
  • Content writing
Your final calculation would be: (42 150 - 25 000)/25 000 = Giving you a 68.6% return on investment

The Good News

All I've explained today can easily be formulated into a custom dashboard using excel or a data analysis tool that you prefer.

Considering SEO for your business

SEO if done correctly is like compound interest on steroids, its the gift that keeps on giving. I've seen it so many times businesses wake up late and want to latch on an SEO strategy when they've already made so many crucial mistakes and lost out on so much potential traffic. Retrofitting your website for SEO is probably one of the most painful tasks you will ever undertake in your lifetime. So if you want to make SEO a big part of your strategy, you owe it to yourself and your business to set up a solid foundation to build your digital empire from.

Contact us

If you want to know more about the value of SEO don’t be shy we’re happy to assist. Simply contact us here

Tags: Data Analysis, google analytics, How to, SEO

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