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  • Varpu Laakkonen

How to measure the ROI of SEO? Case example

Updated: Jan 1



How to measure the ROI (return on investment) for seo?


First and foremost: Yes, all the research available about ROI of SEO underlines the fact that it is extremely profitable.


For example, a study made by firstpagesage calculated that the ROI of SEO for B2B SaaS companies was more than 700% with only 7 months to reach the breakeven.


However, the success depends on the way SEO is made. When the process was strategic and concentrated on high purchase intent keywords, the roi was almost 748% with only 6 months to reach the breakeven.


When content marketing wasn’t strategic and keyword research standard, roi was only 16% with 15 months to reach breakeven.


Today, most of the SEO provided is mainly concentrated on Technical SEO, which is profitable, indeed.


However, as we see in the picture below, the biggest wins are reached with strategic content marketing.



SEO ROI
SEO ROI


What is the formula for ROI?


Formula for calculating ROI is rather simple. We only need two numbers:

  1. Net Profit

  2. Cost of investment



ROI formula
ROI formula



To determine the net profit, we actually need the revenue and the cost of investment.


As it's more fun to calculate the topline, I will start with determining the revenue derived through organic visitors.


(Psst: If you haven’t yet started doing SEO and you want to estimate the potential revenue of your future SEO efforts, try our tool and estimate the potential revenue for every search term related to your business)



How to calculate the net profit of SEO?


To calculate the net profit, we need the following numbers:

  1. Number of organic visitors

  2. Customer lifetime value

  3. Online conversion rate



1. Number of organic visitors


Calculating the number of organic visitors is rather straightforward.


And to make it even more simple, I will use an imaginary example of a single landing page:


Website traffic sources example
Website traffic sources example

Source



Case Upfluence


Uplfuence sells branded content created by social media influencers.


Their service page has aggregated 1000 visitors during its existence.


Further on from Google Analytics we are able to see how this 1000 visitors are distributed:


In this case we can see that 60% of the traffic is coming through organic traffic, i.e. through SEO efforts.


Besides this 60%, a study from Searchengineland estimates that, on average, 60% of direct traffic is actually originating from organic search.


So we count that from the direct traffic, 60% is organic.


And the same goes with referral traffic - 60% of referral traffic originates from organic traffic.


So, in this particular case we can estimate that up to 75% of the traffic originates from organic search.



2. Customer lifetime value (CLV)


Customer lifetime value is the total profit of the customer in its lifetime. Further illustrated the formula is as in the picture below. Again, sounds easy, right?




In the case of Upfluence, we can determine that the average value of a sale is, let’s say 5000€. Yearly one customer makes on an average 3 transactions and average customer retention period is 6 years.


From this data we can derive that lifetime revenue of one customer is 5000€ * 3 * 6 = 90 000€.


From every 5000€ transaction Upfluence hypothetically pays 50% of the revenue for the influencer who is actually taking the picture, so we can further calculate that this imaginary CLV in Upfluence’s case is 45 000€.


I.e. average single customer value for Upfluence would be this much.



3. Online conversion rate


To complete our formula for Upfluence’s organic search sales profit, we still need to determine the conversion rate.


If Upfluence would be selling its services directly online, we would be able to derive the data directly from e.g. Google analytics. We could just divide the number of purchases with the number of visitors. The latest data estimates that the average conversion rate of e-commerce websites is 2.86%. In general, a conversion rate above 10% is considered good. This data does not take into account the intent of a search term. For example, high intent keywords are said to have 4-10x higher conversion rates than low intent keywords. Neither does the data take into account the industry, type of business or any other factor.


However, to keep things simple, we will use the average conversion rate of 2,86 here as an example. So, if Upfluence would be selling their service directly online, the sales profit through organic search would be 750 organic visitors * 2,86% conversion rate * 45 000€ = 965 250€.


Then if Upfluence would only collect leads online and their visitor to lead conversion rate would be the same, 2,86% we would have to ask from the sales team their lead to purchase conversion rate. Probably this percentage would be rather high as these leads are coming inbound.


Let’s estimate that the sales team is able to convert inbound leads into customers with a 40% rate. This would mean sales profit of 965 250€ * 0,4 = 386 100€.


But here’s the kicker: this calculation is only giving the historical data.


In reality organic search will keep on feeding customers for years to come, if you just remember to keep your content updated.


From the example above, you can already estimate that the sales profit will be significantly higher than the costs of SEO.


Let’s count them now anyway.



How to calculate the cost of SEO?


Content creation for your website is like building entrances to your business.


Entrances for a building that is in theory, reachable for every single user of the internet.


When creating content about the core of your business, you are building the main entrance.


When you are creating content about features that you don’t offer, but that support your business you are building a window for people to look inside.


Sometimes businesses are creating content that is not related to their business at all.


In that case you might be building a useless window.


Building entrances cost money. When content is created strategically, you are only building entrances that create additional value.


The costs related to SEO are as follows:



1. Keyword research


Before starting the keyword research, we have a building, but no entrances.


Before we start building the entrances, the smartest thing to do is to plan. This planning can be described as keyword research.


If you don’t plan ahead, you may end up with poorly constructed entrances in the wrong locations.


So the smart thing to do is to hire an architect.


An architect who understands how the entrances are built into the right places. To places where people are moving and that are closely related to your business.


As mentioned earlier, high intent keywords can drive 4-10x higher conversion rates than low intent keywords. So it’s important to find the most potential keywords for your unique business.


Hiring a consultancy company to do your keyword research may cost anything from 5 000€ to 20 000€.


Want to know a well kept secret?


There’s AI assisted tools, such as https://maire.ai that help you to do high quality keyword research by yourself. This tool we built only costs 199€/month.




2. Content creation and content optimization


As we have planned the architecture for the online entrances, the next step is to actually create the content.


Here, once again you can choose to do good work or bad work. You can build entrances that no one wants to enter.


Or you can build entrances that invite visitors over even from a distance.


We choose to do great work.


Content targeted for a specific keyword can be video content, image content, text content or a combination of them all. We do know that enriching content with for example videos, improves the conversion rate by 65%. We want to have content that is engaging.


Some parts of the content creation process can be automated with the help of an AI.


For example, Maire or Midjourney can create stunning images from text:




Also a significant part of the text content creation can be automated with Maire or other tools existing.


But isn’t AI content kind of useless?


Definitely not.


To get a bit of understanding of AI’s level of sophistication, have a look at this video: Two AIs Have An Existential Crisis (GPT-3)


Nevertheless, AI cannot do everything and some manual work is still required.


For example, if Upfluence wants to create content that ranks and creates revenue through keyword “Branded Content”, we need to create great content.


Great content can cost anything from 100€ (done by yourself with a shitty salary, with the help of an AI) to 10000€ (done by a content creation professional, all manual).


When the planning has been done right, the content optimization, or technical SEO is a simple task. You just need to make sure the titles, subtitles, meta descriptions etc. are done right.


This could take maybe one hour and cost around 100-1000€.


So in total, the costs for creating strategic content for a single piece could be anything from 300€ to 21 000€.


In this example, the ROI for creating content for the keyword “branded content” would be:

(386100-21000)/21000

(965250-300)/300


= 1739% - 321650%


In reality, content creation does not happen in a vacuum, and is not an isolated performance.


However, from our point of view, it's by far the most effective way to do marketing.



Conclusion


If you have read the whole article, kudos!


If you have just scrolled down to read the conclusion, here are the key takeaways:

  1. Strategic SEO is potentially extremely profitable, where ROI is measured to be as high as 748%

  2. Technical SEO is important and profitable. But first make sure you understand your business, your potential customers and your competition to find the most profitable keywords and content creation potential.

  3. High intent, “buyer” keywords have 4-10x potential conversion rate when compared to low intent keywords.

  4. You can only measure the historic ROI for SEO, and it doesn’t take into account the profit it will keep on generating in the future

  5. If you are just starting out with SEO and want to estimate the potential revenue of strategic content creation efforts, try Maire.ai

  6. Big portion of SEO can be done with the help of an AI an existing tools, such as Dall-E, Maire.ai or gtp-3

  7. The cost of SEO is very much dependent on the level of content. If you are working in a competitive field, it's probably a good idea to enrich your content with videos and photos to increase your conversion rate and reach the maximum ROI.

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