These days everyone is talking about ROI on just about everything business related, including SEO. With the international economic crisis, this makes sense, as every dollar spent must add something to a business.
However, it's not easy to calculate the ROI on search engine optimization (SEO). The main reason is that, while the cost of SEO, especially if outsourced, is known, it is difficult to get exact figures for conversion rates, unless the site concerned makes sales online. Otherwise, it's difficult to measure how much new business received is a direct result of SEO.
This doesn't mean that one shouldn't try to measure ROI for SEO. With the better and better analytics tools on the market, more data for measuring ROI are becoming available. However, it's especially difficult to predict the ROI of future SEO work. Nonetheless, SEO experts, when asking a company to spend money, should be prepared to show how much value these techniques will bring.
Simple Calculations of ROI
There are various standard methods of calculating ROI in general. Each company will find one that works best for their own situation.
- ROI = [(Payback - Investment)/Investment]*100
- ROI on SEO = (No. of goals achieved x Price of product) - Cost to SEO
- Conversion ratio OR Efficiency of SEO = (No. of organic visits (traffic) / No. of goals achieved) - (for websites that do not sell a product or service directly)
In short, ROI is the percentage of net profit earned on investment. It is easier to calculate the ROI for websites that sell a product than one that sells services.
The Importance of ROI to SEO
The most important aspect of ROI as it relates to SEO is converting general traffic into "value" traffic. That is, SEO techniques can get lots of visitors (traffic) to a site, but what really matters is whether those visitors represent people who will actually buy something. These are the ones that result in increased profit.
To get the best returns from SEO or any other marketing investment, it's crucial to set goals and then measure the returns. The results from SEO are not entirely predictable in advance, so setting specific goals gives something to measure against and provides a guide for corrections in strategy when needed.