SEO ROI: How to Forecast SEO Profits
The first thing on every marketing exec or business owner’s mind when deciding whether to invest in a new marketing channel is always: how will this affect my return on investment?
We get it. With so many new channels popping up every day, it is important to be strategic about which marketing tactics you choose to budget for.
As a digital agency specializing in search engine optimization services, I have talked with my fair share of skeptical marketing execs and business owners about investing in SEO. With so many myths and variables surrounding the channel, it can be an intimidating venture to budget for… and I completely get it. After all, you are investing a lot of money into a channel that’s hard to measure, is relatively new (at least compared to billboards and TV commercials), and takes a bit of time to provide results. With that being said, SEO is a long-term investment.
While ROI will vary for each company that invests in SEO marketing services, there are ways to reasonably forecast the potential value of this channel for your business. Using some simple (FREE) tools and some elementary-level math, you can get an idea of the potential SEO ROI from an SEO strategy. And don’t worry… you don’t have to be an SEO expert to figure this out.
Step 1: Estimate The Search Volume For Top Keywords Or Phrases
Before you can produce revenue from organic search, you have to generate traffic. Pretty self-explanatory right? To generate organic traffic, one must have a clear understanding of the size of the market. In SEO, we do this by looking at the monthly search volume for certain keywords and phrases.
Begin by choosing one of your most popular products or services and from a list with about 15 of the most obvious keywords that potential customers might search to find your product or service.
Next, use Google AdWords’ Keyword Tool (which is completely free with a Google AdWords account) and input these keywords into the Keyword Planner. When the results are in, look at the Average Monthly Search Volume for each keyword. This gives you a conservative estimate (as Google doesn’t like to over-promise) of the size of the online search market you are trying to target. You can do this for any product or service you like (or all of them!). But for the sake of time, we recommend using your top-performing products or services.
Step 2: Find The Your Current Ranking Positions
Knowing where you are is knowing where you stand. In SEO, high keyword rankings correlate to increased website traffic. Website traffic is a common thread and Key Performance Indicator (KPI) in all SEO campaigns. To go full circle and truly understand where your traffic is coming from, we must first look at our current organic keyword rankings.
There are many tools out there that find and track keyword rankings. For a free and accurate solution use SERPs.com. Type in your keyword and your website’s URL. Select Google as your search engine and choose from desktop or mobile rankings as they will differ.
Your results will appear in a matter of seconds, giving you your current ranking position for that keyword. SERPs will even tell you if you have a localized listing from Google as well.
Now you can gather your results in a Google spreadsheet or Excel doc to track organic ranking progression.
Step 3: Estimate Click-Through-Rate (CTR)
Now that you know the average monthly search volume for each keyword, you need to determine what percentage of those monthly searches you can get to your site. The easiest way to do this is to consider the Click Through Rates (CTRs) on organic searches on page 1 of Google.
Luckily, there have been many studies on the CTR of rankings on page 1. A few years back, seoClarity performed the largest study of its kind for CTR across millions of domains and basically found that the higher you appear in the order of organic search results, the more clicks you will attract as well as the percentage of traffic you will get based on your position on page 1. Makes sense?
Step 4: Estimate How Competitive The Keywords You Chose Are
Here is where we get to use one of our favorite tools: the MozBar Google Chrome extension (which is also free I may add). Basically what this tool does is tell you the Domain Authority (DA) of any site you navigate to in Google Chrome. What’s DA? DA is a score (on a 100-point scale) that predicts how well a website will rank on search engines – basically a good estimate of how trustworthy Google deems your site to be. Websites with higher DAs typically rank higher on search engines than websites with lower DAs.
In order to estimate where you could potentially rank on page 1 of Google, install the MozBar and navigate to your site to find your DA. Next, type in a few of those keywords you researched earlier and see if there is anywhere on page 1 that you could rank. Look for any results that have a DA lower than yours. If you optimize your site correctly for this keyword, you could take that competitor’s spot on page 1! If all of the DAs on page 1 for a specific keyword are significantly higher than your DA, the keyword or phrase may be too competitive and you should focus on other, less competitive phrases.
A good rule of thumb is to find Domain authority scores no greater than 10 above your current domain authority. If the keyword difficulty is beyond that range, it may be too competitive at this time.
Step 5: Calculate Potential Traffic
Hopefully you’ve been brushing up on your arithmetic – some multiplication comes into play here. Use the results you found from Steps 1 through 3 to estimate your monthly web traffic from organic search by simply multiplying the monthly search volume by the CTR (%) of the position you are shooting for e.g. position 5 . We recommend using the CTR from positions you could possibly rank for found using the MozBar, so please do not think you will rank position 1 for everything.
Let’s look at an example:
My e-commerce website has a product keyword ranking in position 3 on Google SERPs with 1,000 average searches per month. I’m close to position 1 and want to forecast to move into position 1 over the next few months and want to understand how that would increase my revenue. My average organic order value in Google Analytics is $150.
Step #1: Calculate Potential Traffic in Position 1 for a keyword
1000 (monthly searches) X 19.3% (position 1 CTR) = 193 (people clicking to your website)
Multiply your Monthly Traffic by Conversion Rate by Close Rate by Average Sale to calculate your Estimated Monthly Revenue.
Step 5: Estimate Profits And Timing
Using all of this information, you can get a clear estimate of profits and how long it will take to achieve them. Assuming you have already talked with a few agencies or contractors, you want to consider how much you would be paying per month for SEO services. Using this number and the revenue calculated in Step 4, you can calculate your ROI using the following information:
- Average conversion rate (usually about 2% for ecommerce sites and 5% for lead generation sites) – For more accuracy this can be pulled exact from Google Analytics
- Average close rate (what percentage of leads turn into customers) – if you are a lead generation website
- Average sale (the dollar value of your average sale) – for ecommerce websites
Step #2: Forecasting SEO profits from a keyword
193 (new visitors to your website) X 2% (average ecommerce conversion rate) = 3.86 conversions round to 3 to be conservative)
3 (conversions) X $150 (average organic order value from Google Analytics) = $450
As a result, we can forecast $450 /a month in new revenue for this one keyword if we got it to position 1 from its current position 3.
It is important that I make one thing clear: SEO takes time and you may see no ROI or even negative ROI the first few months. Don’t panic! That is just how SEO works. Search engines compensate websites that consistently produce valuable content for an extended period of time by ranking them higher in the results.
If you do see immediate results from SEO, you may want to re-evaluate your SEO strategy. You could have hired an SEO agency that actually isn’t doing your website any favors at all in the long-run. But just to appease you and give you a number, you can expect to start seeing results in about six months, give or take.
SEO sometimes gets a bad rap when it comes to ROI. But those who have had success can tell you that although it may take a while, SEO has tremendous payoffs. It is always important to do some initial forecasting before investing in any new marketing channel in order to budget correctly and keep expectations realistic. With this technique for forecasting ROI, your SEO will always make cents – dollars and cents! Talk to the search engine marketing experts today!