A Simple Way to Calculate Return On Investment for SEO

Return On Investment for SEO

What is the ROI for SEO?

What will be my “Return On Investment” (ROI) if I pay someone to provide or manage SEO Services?  Now that can be a tough question to quantify.  Why you ask?  Because the search engine industry is very subjective.  In other words, ten different people can look at things ten different ways and still, all of them can be correct.  However, in the spirit of simplifying terms, let’s take a stab at it shall we?  For people who are new to the World Wide Web, this should be one of their first questions.  For SEO’s, this is a question that has been asked over and over by clients since the beginning of the search engine era.  It’s an important one.  If there is no benefit to ranking well on the search engines then why bother going to the trouble of ranking well on them?  So in order to see if there is any true benefit in ranking well on Google, let’s perform a small case study and see if we can estimate some traffic and some ROI for a specific keyword.

“There are no secret sauces in Search Engine Optimization.  Only work.  If you know what to work on then you can optimize a web site to perform well in the search engine results pages.”

Keyword Research – Arguably the most important part of any successful SEO campaign.  If you optimize a web site for the wrong keywords, you will either get NO traffic (because you are flagged as a spammer by Google) or you will get a TON of traffic and your Bounce rate will be through the roof because the content of your site was not relevant to the key word someone searched for and then clicked through to see your site.  So let’s start there.  I am not going to go into a whole long process of Keyword research, let’s just pick a keyword with some good traffic potential and use the numbers from there to help us estimate some traffic.

“Please remember that all of these numbers (even the ones provided by Google) are simply ‘estimates’.  No one in the search engine world is going to give you firm search result numbers!”

So for the purpose of this exercise, I selected the Keyword Phrase [iPhone Accessories].  Note the graphic shown here:

iPhone Accessories Keyword Research

Note the total Global, Monthly Searches and the Competition

This graphic indicates a couple of things.  First, that there are over 201,000 monthly, global searches in Google for this search term.  Second, it is a highly competitive keyword.  Just imagine how many web sites are out there trying to sell iPhone Accessories.  So assuming we can get it to rank well, what kind of traffic can we expect?

“How would you like a large percentage of the Global Search traffic visiting your site monthly?  And visiting just for your preferred keyword?  Not a bad way to start the day I’m guessing!”

So, to be honest, there is not much out there in the form of statistics for this data.  I had to dig really deep and even then I only found a few useful tidbits of information on the subject.  The most well known study on the subject was an “eye movement” study by Cornell University. 

 Cornell University Click Through Data

Here is link to the original study and results:  Cornell University Click Through Study

Since this is an “eye movement” study and not actual click through data, it has come under fire from the SEO community and the search engines themselves.  So several other resources and “studies” (I use that term loosely) have also surfaced in recent years.  The following chart is more of a compilation of the all of the resources I have found and then averaged out across all of them.  Nonetheless, it should give you an idea of the general consensus by the search engine community as to what are acceptable numbers for this particular discussion.

 Search Engine Click Through Data

So, what does all of this mean to someone trying to sell iPhone accessories?  Let’s take a look.

Assuming a modest profit margin of 47%, the following is a rough estimate of the return on investment for SEO (assuming you actually get to #1):

Google’s Estimated Traffic – 201,000 Global Searches per month

If you are ranked #1 for the keyword “iphone accessories” you can expect about 85,405 visitors per month.

Assuming a conversion rate 3% (average being 3-6% with some sites much higher), you can expect 2, 562 sales.  If the average sale is $25.00 (or $64.050 in revenue) at 47% profit, you can expect to net $33,946.50 in profit, from this one keyword, per month.  Subtract the cost of your SEO program managment and/or consultant and you then have your true ROI.

Disclaimer – There are a LOT of broad terms and numbers shown above.  Please try to remember the following; That Google’s traffic estimates are not always accurate, that this study assumes several things (conversion rate, selling price and profit margin), that the site selling this item is an authoritative site and has not only a lot of content, but quality content and that the owner of the site either performed the search engine optimization or hired an SEO firm to help them rank #1 for that keyword.  The keyword used is a highly competitive keyword and it may take 9-12 months (or longer) to rank high on the SERP’s.

“Now do you see why some people have the ‘Gold Rush’ mentality when it comes to Google and trying to rank number one for a particular keyword?  It’s no wonder why ‘black hat’ techniques and ‘Counter SEO’ techniques are still viable practices going on every day.  There is a lot of money at stake here folks.”

Being at the top of the natural search results is every internet marketer and retailers dream.  It promises fame and fortune, recognition and validation that you have succeeded in the world of online marketing.  The work is hard, the road is sometimes long, but the payoff can also be life changing for a small company or web site.  The key is selecting the correct keyword and then optimizing your site and then marketing and growing your site.  It does take time, energy, resources and most importantly….patience.  But if you have the resolve, you too can reach the top and then you get to see what’s there waiting for you!

For the record, and as stated above, there are many ways to calculate return on investment for any venture.  This is just one and yes, it is a simplified measure.  But if you start thinking along these lines, you will definetly be headed in the right direction.

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28 Comments

  1. So the return on investment depends largely on the effectiveness of the key words to lead paying customers to your site and not necessarily on how well you rank at some hard fought popular key word?

  2. @Ken – The ROI relies heavliy on selecting the correct keywords. Optimizing a site for keyowrds that are not effective or do not have enough monthly traffic will in turn result in very little or no traffic to your site. On the converse, if you optimize your site for a very competitive and popular keyword, you will eventually drive much more traffic to your site from the search engines. The problem comes in that most people do not want to spend the money to promote and optimize their site properly nor do they want to wait. Some of the more popular and competitive keywords can take well over a year to rank for.

  3. I agree. In our biz, SEO, website design, web development, logo design, etc., the keywords are meaningful obviously but soooo competitive. Imaging running a PPC campaign for these keywords! A great way to drain your checking account in a hurry. Try to find your niche, geographically to a local region (eg South jersey Web Design), or by product/service (web Design for Pit Bull Terriers). Try to hone & sharpen your keywords to something even more unique and you may find your site ranking a bit faster.

    Great article Mike.

    • Jeff – Great take and on with PPC. In my humble opinion, PPC is for the big guys that have an unlimited budget and they are rolling out a new product or service and want to get traffic immediately for the product or service until their SEO efforts kick in. PPC is rarely a winner for small business long term.

      You are also correct in honing your keywords down to the best “niche” market that still delivers good traffic!

  4. Great thinking about organic SEO in this blog . I agree with your blog fully,so let me know when you update your blog.

    • Thanks for reading Organic SEO! You can subscribe to this blog on the right and get an email whenever we update a post or post a new article.

  5. Jason E.

    Man this is GREAT. I have been looking for something like this for a while. I need to justify the ROI for SEO to my boss.

    Mike – Is there any way I can use some or all of this in my report? Can I get a copy of your spreadsheet? I understand if not…

    Thanks man really. I found this post just in time!

    • Hi Jason!

      Sure, feel free to use any or all of this articel in your report (as long as it does not get posted ont he internet). I can also send you my spreadsheet, I iwll send it right out. I hope it helps!

      BTW – Keep us in mind if you decide to outsource your SEO ;) !

      • Jason E.

        Thanks Mike I got it.

        Yes…I will definitely be asking you for a proposal. I sent the web site URL in my reply email. I also bookmarked this blog and tweeted this post!

        Thanks again!

  6. Really super blog to readers related organic SEO,everyone can motivate from this blog. Good going, give some additional points add in the future.Thanks

    • Thanks for reading Organic SEO and the kind words!

  7. Great article with much good advice and theory.

    Readers looking for ways to calculate Return on Marketing Investment, or ROMI, might also be interested in trying a ROMI calculator which:

    1) Teaches you how to calculate ROMI with step-by-step instructions
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    It’s at http://www.inbound-marketing-automation.ca/romi-calculator/

    • Hi Eric –

      Thanks for reading and the nice reply. I always like when others can add relevant and related informaiotn and/or links to other resources!

  8. JohnLowmaster

    Thanks! It does also point out the need for conversion optimization. What a shame if you do all the work to get people to your site, but nobody buys!

  9. James

    Hi Mike,

    Great article! Got a quick question for you, have you ever run into a situation where you’ve gotten the keyword to ranked in top 5 of Google, but the traffic generated from the keyword is no where near 1% of the estimated global or local traffic indicated in the Google keyword tool? I even try to look at the phrase match and exact match volume of that same keyword and the real incoming traffic from the keyword is no where near my expected incoming traffic. I am puzzled by this type of situation as it has happened to a few of the keywords that I have optimized for, have you also encountered similar situation?

  10. Hi James – Thanks so much for reading and the comment.

    Yes, sadly, I have seen this before. Google has come under some pretty harsh scrutiny in the past for their traffic estimations. Google claims that the traffic esimator is for PAID advertisements only and will not really comment on organic traffic. They also state that flucuations in daily traffic is normal and thats why they give averages.

    My take on this – I use the Google Adwords Keyword tool as a starting point and optimize around specific keywords that show potential for good traffic. I have seen them underestimate traffic and over estimate traffic. So I use their tool, but I always remember that it is theirs and not mine.

    Hope this helps!

  11. I have read the article,and I want to say thanks to you for exceptional information. You have provided deep and easily understandable knowledge to us.

  12. zac

    nice info on the SEM. Thanks for the part on calculating the ROI on seo services. I am learning everyday!

  13. Thanks for the Informative Post. Now I am able to calculate ROI.

  14. @SEO Riyadh – You’re welcome! Thanks for reading!
    Mike Glover recently posted..What Does It Take to Rank Number 1 On GoogleMy Profile

  15. thanks for this sharing and Conversion optimization is something which is subtle, but very powerful at the same time. Interesting that SEO are fragmenting themselves into architecture, links, and conversion optimization.

  16. @Amir – Thanks for reading and the comment!

    Fragmentaiton is the natural progression of SEO and in my opinion, is the sign that SEO is entering it’s “Young Adult” phase. If SEO is to survive, it must adapt.
    Mike Glover recently posted..What is the ROI for 10,000 Tweets on Twitter?My Profile

  17. Good post but I was wanting to know if you could write a litte more on this subject? I’d be very thankful if you could elaborate a little bit more. Cheers!

  18. I completely agree with you on this Mike. The hardest thing I’ve come across with clients is getting them to understand the importance of identifying the correct keywords. It’s a long, hard process but the results are absolutely astounding when you can target the correct keywords. Great post.

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    Claudia recently posted..ClaudiaMy Profile

  20. Hi Claudia –

    Well you can certainly export your posts from WordPress if you want, but for my money, there is no better, nor more SEO friendly platform than WordPress. If you need some tips, hit us up via the sales channels…we’ll be glad to help!

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