How to Calculate ROI for SEO
Search engine optimization (SEO) can dramatically increase your website's traffic and in turn boost revenue, but increasing a site's ranking on search engines isn't free. Optimizing requires minimal effort and investment in some niches, but companies in high-competition industries such as insurance must pour money into SEO campaigns to see any benefit. Because SEO can be very expensive, it is a good idea to compute the return on investment (ROI) of your endeavors to determine if SEO is a profitable strategy for your website.
Other People Are Reading
Instructions
-
-
1
Estimate the additional revenue resulting directly from your SEO activities. This is harder to determine than costs, because it takes time for SEO strategies to produce results. The best method is to compare revenue before and after optimization activities. For example, a website might have ranked 10th on Google for a keyword and earned $400 a month in revenue before SEO. After SEO, it jumped to the first position in Google search results and now earns $4000 a month. The new revenue in this instance would be $4000 - $400, or $3600. Multiply this number by the number of months the benefits from SEO last or how long you expect them to last. The effects of SEO are not permanent. Assuming in this example the benefits of SEO last 5 months, you would multiple $3600 by 5 to obtain $18,000. In a normal situation, you would experience different cash flows each month, so adjust accordingly.
-
2
Compute the cost of search engine optimization to find the amount of your investment in dollars. Add up all the costs directly related to your SEO endeavors. This includes money spent on consultants, software, employee wages, content writing, text link advertisements and any other expenses you incur specifically for SEO.
-
-
3
Subtract your investment from your SEO revenue to calculate net profit. Divide this number by the investment to compute return on investment (ROI). Profitable projects have ROIs greater than 0. The higher the ROI, the higher the return on investment. Your SEO campaign broke even if ROI equals 0 and you lost money if ROI is less than 0.
For example, say you earned $18,000 from SEO and spent $2,000. The ROI in this case would be ($18,000- $2,000)/$2,000. This equals 8.
-
4
Compute ROI over a designated period of time if SEO is an ongoing effort or you expect the benefits to last indefinitely. For instance, say you earned $12,000 from your SEO campaign last year and spent $3,000. Your ROI for the year would be ($12,000- $3,000)/$3,000, which comes out to 3. If you spent $18,000, however, the new ROI would be ($12,000- $18,000)/$18,000, or -0.333.
-
1
Tips & Warnings
Consider including the opportunity cost of lost wages in your investment if you performed much of the SEO work yourself and gave up other work opportunities to do so. If you earn $10 an hour and worked five hours less per week to perform SEO work, for example, it is more realistic to include this economic cost in your ROI calculations.
