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SEO ROI
Last updated: May 17, 2023
https://cmlabs.co/en-my/seo-terms/seo-roi
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What is ROI SEO?
ROI, or Return on Investment, is one of the KPIs used to measure the effectiveness of your company's SEO activities. Technically, ROI calculates the net profit obtained from the nominal investment that has been issued to run the SEO campaign.
The Importance of Determining SEO ROI
Most of the traffic that websites get comes from organic search. Through the implementation of good SEO, a website can increase the number of visitors. So, does the SEO KPI only refer to the amount of traffic?
Some SEO specialists focus too much on metrics like organic traffic or ranking positions. Both of these metrics are important, but the end result expected from SEO is financial business growth. Unfortunately, not many SEO specialists know whether the activities carried out are profitable for the business or not.
A high amount of traffic will be useless if it doesn't impact the business financially. By calculating the ROI, you can find out how well the channel is generating profits for the company.
How to Calculate SEO ROI
If you want to know how effective your SEO activities are at generating returns on your investment, you need to know how to calculate SEO ROI. There are several other metrics that you should know before measuring ROI, namely the cost of SEO investment and conversion value obtained organically.
Calculate SEO Costs
The first step that needs to be taken before calculating ROI is knowing how much your investment costs for SEO activities. To find out, add up each SEO-related budget. Some of these budgets include:
- In-house SEO budget (internal team): Total salary costs for the SEO team from within the company. You can also add salary costs from other teams that work with SEO, such as web developers and content writers. Count how much time they spend on SEO tasks and how much it costs.
- Agency budget: If you work with an agency that provides SEO services, setting a budget will be easier. This is because the agency usually sets a fixed fee every month.
- Budget for using tools: The use of paid tools also needs to be counted as an SEO investment cost.
Calculate the Value of Organic Conversions
After determining the investment cost, you must also determine the conversion value of the SEO activities. Every website has a different method of calculating this conversion value because the business model may not be the same.
If the website type is e-commerce, you need to enable e-commerce tracking in Google Analytics. The method is as follows:
- Go to the Admin menu > View > E-Commerce Settings.
- Press the "On/Off '' button to turn e-commerce tracking on or off.
- Add the e-commerce tracking code to your website.
- Google Analytics will collect sales data, on which you can view reports after some time.
To find out the conversion value, you can access the e-commerce report in the "Conversion" menu in Google Analytics. Segment the data so that it only shows data from organic traffic. Then, pay attention to the "Revenue" metric. These metrics will be used to calculate ROI.
If your website type is lead generation, the process will be a little more difficult because transaction costs occur offline, so you can't know the exact figure of the conversion value. To overcome this, you can estimate the value of each of these leads.
Calculate ROI with SEO Cost and Conversion Value
You have all the required data, such as investment cost and conversion value. Next, you can calculate SEO ROI by using the following formula:
(Conversion Value - Investment Cost) / Investment Cost = SEO ROIcmlabs
For example, you managed to get 75 million rupiah from the results of the SEO campaign. The cost required to run the campaign is 25 million rupiah. From these two data points, the ROI from the SEO activities that you carry out is:
(Rp75.000.000 - Rp25.000.000) / Rp25.000.000 = 2cmlabs
From the results of these calculations, the ROI value is 200% (2 x 100 to get the percentage value). That is, the SEO activities carried out can generate profits equal to twice the investment costs incurred.
Challenges in Calculating SEO ROI
Calculating ROI has more challenges compared to other strategies, such as PPC. The reason is that SEO usually does not have a fixed investment cost for each period. This makes the ROI value difficult, if not impossible, to use as a reference in determining the investment value for the next period.
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