The ROI of SEO

Search marketers can't get our important work implemented if we can't prove that it's worth the investment to our higher-ups. 

With that in mind, Moz’s own SEO Manager, Kavi Kardos, is going to give you the numbers and the talking points you need to justify the return on investment of your SEO work.

Video Transcription

Hi, Moz fans. Welcome to another edition of Whiteboard Friday. I'm Kavi Kardos. I'm the SEO Manager here at Moz, which means I'm responsible for Moz.com's own SEO strategy and implementation along with the other SEO subject matter experts who you've seen many times before here on Whiteboard Friday.

The ROI of SEO

I'm going to talk to you today about the ROI of SEO, which is an important topic for website and business owners themselves to understand, but maybe even more important for the in-house and agency marketers who work on those websites to understand. The reason for that, as you probably are already well familiar with if you are one of those in-house or agency marketers with managers or clients to answer to, is that we as search marketers can't get our important and lucrative work implemented if we can't prove that it is lucrative.

People in positions like a CMO or a head of the marketing department or a small business owner have a lot to worry about all the time, and they often have to make really tough decisions about how to allocate really limited budget or other resources. So if I'm talking to you as the person who is responsible for making those tough decisions yourself, I'm going to help you understand why SEO is worth that resource expenditure.

If you're the person who has to do the convincing, I'm going to give you the numbers and the talking points you need to justify that return on investment. 

Calculating potential profit

So I mentioned numbers, and you can see that there is some math going on, on this whiteboard behind me, but don't freak out. I am not a math person myself, but I do understand that a head of marketing or a small business owner, who has a really tight budget to deal with, needs to understand the actual potential profit if they're going to go all in on an SEO strategy.

Even here, working at an organization whose entire jam is SEO, I still have to justify the SEO projects I want to work on, the experiments I want to run, and the tools I want to use in terms of their potential to actually generate revenue, either directly or indirectly. You can do the same thing if you can identify a fairly solid key performance indicator for whatever it is you're proposing with some math that's actually pretty simple.

So let's look at our example website, widgets.com, which is currently ranking number three in this SERP for one of their most relevant and lucrative search terms "extra fine blue widgets." So we know that on average the organic click-through rate for a web page that's sitting in the third position on a SERP for a transactional search query like this is about 7%.

In this example, our KPIs are organic SERP ranking and also click-through rate. Yours might be slightly different, but those are pretty average concerns for SEOs. So right now, with that 7% click-through rate, this page is generating 500 monthly organic click-throughs on average, and once a customer actually arrives on that product page, they have about a 3% tendency to convert or actually purchase that widget.

That's on the high end of average for e-commerce. With that widget costing $50, we are looking at an average monthly revenue from organic search of $750 a month currently for that page. 

So this is the beginning of our math. I hope you're still with me. 

Chelsea, the SEO manager for widgets.com, wants to convince her boss to subscribe to an all-in-one SEO tool that's going to help her do in-depth keyword research, competitive analysis, identify potential link targets, and that's going to help her write some really solid on-page content, run her technical audits, and maybe earn some new, high-quality links pointing to the entire website and this product page in particular.

So her boss, of course, wants to know how much this is going to cost the company. So Chelsea does her research and finds a tool that can do all of that for $179 per month. So she gets to work after her boss signs off on that, and she is able to bump this page in the SERPs from the third position for this query, "extra fine blue widgets," up to position number two.

Now, we know that a transactional search query like this, the page that's in the second position in the SERP earns about an 11% organic click-through. So now this page is drawing in 785 organic click-throughs per month. We're going to keep this 3% conversion rate once the customer is on the page constant, just for simplicity's sake.

But, of course, we know that Chelsea's good work on that product description and user experience on the page could very well bump up that conversion rate too, which is great. But just to keep it simple, we'll leave that conversion rate constant. It still costs $50 to buy this widget. So now this page is bringing in $1,200 from organic search every month. That is currently a $450 increase per month over when this page was ranking number three. If we take out the cost of the tool that Chelsea is using, we end up with a profit per month of $270, and that works out to about $3,000 in profits per year.

We can run those numbers again and assume that Chelsea is able to get this page to rank number one for this particular SERP, thereby earning it a 22% average click-through rate.

If she can do that, then that much greater increase in organic click-throughs, with that constant conversion rate and the price of the widget, is going to get us an extra $1,600 per month in profits. Again, if we take out the cost of that tool, that is going to come out to $17,000 per year. 

So now $179 a month for some tool sounds pretty good, right?

I know that's a lot of math that I just threw at you. But imagine if widgets.com sells hundreds of products and she's able to get even a small percentage of those to improve in search ranking. Even if you have glazed over the specifics a little bit, you can sort of get the idea here. 

So in reality, the average return on investment in SEO for an e-commerce company is about $2.75 for every dollar that you spend.

Your mileage is obviously going to vary based on your industry and the website metrics that you have to start out with in actuality and your competitive landscape. If you're working on a website that is not e-commerce, it's going to be a little bit harder sometimes to work out the dollar value of the work that you're doing. If you're working on a lead gen site, you'll need to figure out an approximate dollar value for every lead that you generate.

Or if it's a content publisher, maybe it's the ad space that you were able to sell or whatever your site's moneymaker is. But this basic model will work regardless of industry or your competitive landscape. 

Forecasting and proving ROI

So moving over here, I want to remind you that one of the most useful and effective tools that you have in your toolkit for forecasting and proving return on investment is something that you're probably already using for SEO, and that is Google Analytics.

So if you don't have your Analytics account set up to track the goals and conversions that are important to your business, you're missing out on a free and relatively simple way of showing exactly how much your SEO work is affecting your bottom line. You can set up your goals in your View Settings of your Google Analytics account, and you can customize those so that every time a user completes an action, like scrolling down a page to a certain point, clicking on a button, or obviously making a purchase, that gets recorded as a goal completion in Analytics.

You can see all of your goal completions for whatever time period you want within the Conversions menu of your dashboard. If you have a dollar value attached to some or all of those goals, you can filter this down to just organic traffic so that you can see exactly how much money each of those goal completions is bringing in per month.

This can still work if you're able to attach some kind of dollar value to your completions or your goals even if they're not e-commerce related necessarily. If you do sell products, though, the E-commerce menu under Conversions is going to have some other really great insights, like how well each of your products is performing each month and which of your coupon or affiliate codes is performing the best month over month.

Compared to the competition

So sometimes the best way to convince yourself or your managers that investing in something like SEO is a good idea is by talking about it in terms of dollars and profits, like we just did. But sometimes you want to recognize that your competition is already doing this thing that you're considering and already seeing success.

At this point, any organization with a website that's not investing in SEO is far behind the curve. So 60% of marketers currently say that SEO is their number one concern when it comes to inbound marketing. Forbes tells us that over $80 billion is being spent each year just in the U.S. on SEO, and that number is going up all the time.

So, obviously, if you want to contend with your competitors who are taking up space in those SERPs, you need to be able and willing to play the same game as they are. 

But here's something else that's interesting. We saw a recent study that said that only 49% of small businesses say that they invest in SEO. So this is interesting because almost 100% of purchases these days involve organic search in some way, and yet less than half of American small businesses are doing the work that it takes to become part of that buyer journey. So if you are a small business or if you're an agency that works with SMBs, then, yes, your biggest competitors are absolutely already investing in SEO.

But if you join them, you may be able to beat out some of those smaller guys who didn't make the smart choice to invest. There is a lot of opportunity in this statistic. 

Cost of inaction

So the opposite of return on investment is the cost of not investing or the cost of inaction. We just went over one of those costs — losing out in the SERPs to your competition.

But another cost that you face if you choose not to invest in that tool suite, not to hire the SEO agency, or not to let your team focus on SEO work is letting your website stagnate or at worst letting your website deteriorate as a result of lack of attention being paid to routine SEO maintenance. Your internal links can quickly become outdated if products get removed from your catalog.

On-page content can also really easily become outdated. If you had some valuable traffic being sent to your website from other sites that were linking to you externally, if your site changes, then those links could become outdated, or they might just choose to remove them and you wouldn't even notice. If you have to go through something like an entire site migration or a restructuring of your internal architecture, those results can be disastrous if you don't pay attention to the important SEO concerns that are at play there.

So if you were ever considering hiring an in-house SEO or an agency, it's probably because you knew that you didn't have time to pay attention to that kind of routine maintenance on your own. So the odds are that if you don't make the commitment to that investment and get someone in there to help you, your site is going to suffer.

Final thoughts

So the most important caveat in all of this, to remind yourself or to convey to your managers, is that SEO, of course, takes time. It can be really exciting when you're thinking about dollars and projecting those profits to get excited about the potential results. But remember that in our example earlier it took time for Chelsea to do the work that was necessary to improve those pages that she was working on.

Then it took even more time for Google to do its job and for that work to actually affect those SERP rankings and the click-through rate as a result. So there's a gap between where we spent the money on that tool suite and where we actually saw the return. That can be really frustrating for business owners and especially for the SEOs who are trying to justify their work.

That's why it's so important to manage expectations around timing and the plausibility of your results during that sign-off process, before that check is signed, so that you can minimize the frustration that can come from waiting. But if you can get your stakeholders on the same page as you are about your SEO work and use all the really great tactics that you've learned to get the best and most effective results possible, you will earn that buy-in, you will make your bosses happy, and it will be that much easier for them to sign off on the next project that you propose.

So thank you so much again for watching this edition of Whiteboard Friday. I hope this was useful to you. Again, I'm Kavi Kardos. You can find me on LinkedIn under my name or on Twitter @therarevos and tell me your favorite ways to demonstrate ROI. I'll see you next time.

Video transcription by Speechpad.com.