Best SEO Companies Calculate the ROI

Staff Writer: Jessica Ross

Date: 7.24.2012

 

How do you determine the return on investment (ROI) on a search engine optimization project?  The best SEO companies look into: justify spending on the project, increase spending on an existing project, transferring funds from other marketing areas to SEO, and reduce spending on paid search and increase spending on search engine optimization.

The return on investment for a SEO project usually is high and out does the other marketing channels.  Search marketers believe that all channels should be scrutinized and they encourage harsh ROI analysis on all strategies against each other.

Using a non-brand SEO traffic as your key measure identify a baseline traffic number that will represent the average current state.  Total traffic changes due to brand SEO traffic from other marketing initiatives and non-brand SEO traffic.

Using your analytics program, Google webmasters tools, ranking monitors, and search engine search volume data can help to determine potential traffic.  Calculating the company specific, industry and general search engine click-through-rates are used to estimate potential traffic.

When factoring traffic timing, be sure to anticipate the rate of implementation of the recommendations, as well as time lag to account for indexing done by search engines.  Keep natural growth in mind when dealing in search volume and company growth from the baseline.  When estimating additional traffic, these growth rates should not be included, because this traffic is always expected.

The top SEO companies use two key valuation methodologies to determine the value of the new traffic.  First you must identify the additional value of the search engine optimization traffic that is being driven to the website.  This method applies a conversion rate to the additional traffic being generated and the multiply that number by the value of a converted click.  Even if the data isn’t available it’s still important to estimate based on the best available data.  This will give you some kind of indication on the value of traffic.

Identify the time period over which the SEO project will keep providing additional traffic.  This will vary between projects, companies, industries, and the competitive level.  It’s best to use one to two years to calculate the total additional traffic.  The cost of the SEO project minus the value of additional traffic is the ROI.  The SEO project cost should only be internal and external costs and exclude sunk costs.

The next methodology is about the replacement value of the SEO traffic, which is based on traffic from other channels, such as, paid search and banners.  Additional SEO traffic estimate and adjust for different conversion rates between organic and paid search.  Organic usually coverts at a higher rate than paid.  Use multiples between two and five to gross up the traffic estimate, which means to replace the SEO traffic, you must buy between two to five times more traffic.  Be sure to calculate the average cost per click to apply to the estimated traffic increase.

Using both methodologies will be beneficial and provide a range of results based on different levels of investment.

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