How Can We Calculate ROI for SEO

Being in the SEO business for many years now, I ‘ve acquired a lot of experience interacting with clients and potential clients in the presales phase. One thing clients almost always want to know is how their investment in search engine optimization services is going to pay off. In other words they want us, the SEO professionals, to provide some sort of ROI analysis. They want to know that if they spend $10,000 on an SEO campaign, they will increase their sales or leads by n percent. There are different ways to try to answer this important question of calculating ROI for SEO, but there are too many variables that are beyond our control (but rather are controlled by the search engines) to make any accurate promises. The best we can do is get a general gist of the ROI.

First, we need to know what the average value of each visitor is. Suppose a small but successful company sells manufacturing cost estimating software and, along with that, they also land many cost estimating jobs. This is something that goes on in the construction business all the time. For a business like this, each client may sign a contract for anywhere between $80,000 and $400,000 – at least those were the numbers that one of my clients were dealing with. The point is that it only takes one customer like this to score an ROI of something like %50000! Of course, most business sell products and services that are much more modestly priced. In either case, the business owner needs to calculate the average value of each visitor.

This can be done simply by dividing the number of visits by the amount of revenue generated. This will tell us the average value of one visitor. Once this has been figured out then we need to look at the keywords that will bring more targeted visitors to the site. We use the Google Keyword Tool to find out how many times a month a keyword is searched for. We do this for each keyword that the client wants to rank on page one for, followed by adding it all up. At this point we have the combined search traffic number. But how many of these searchers will end up on the client’s site? That depends on where the keyword is on page one.

Sites listed in position one get about 36% of all the visits. Position two gets about 12% and position three gets about 9%. Positions four through ten get three or four percent each. We now have all the information needed to calculate a rough ROI estimate. The variable is the keyword positioning. So if the combined traffic total for a client is 500,000 monthly searches (all the keywords the client wants to rank for and the sum of their monthly searches as provided by Google) and the client has keywords on page one but below position three, then we could just estimate 3% click-through-rate. So what is 3% of 500,000?  The equation is 500,000 * 0.03 = 15,000. So the client should expect, after a successful campaign, 15,000 visitors a month. The fun part here is changing the variable, that is, where the client’s keywords rank on page one. If half of the keywords are in the top three positions, then there will be much, much more traffic.

Now that we know there will be about 15,000 visitors a month, we need to multiply this number by the average visitor value as described earlier. If the average visitor value is $1 then the client should expect to make $15,000 after the SEO campaigns have been completed. This is a process that a professional seo company would be happy to help his potential clients work through. Some companies charge for this kind of consultation because, after all, it does take time. Other companies who are struggling to get business will probably offer these consultation services for free, to win the sale. Either way, these SEO consultations need to happen. Good SEO starts with selecting the best keywords, which are the most profitable ones for the client’s niche.