One of the key indicators that an SEO campaign is moving the needle for your business is the return on investment. According to Investopedia ROI is calculated by the formula:
(Gain from investment)-(Cost of investment)/(Cost of investment)
While it can be difficult to measure the exact amount of value that is generated from a specific SEO campaign, there are several ways to get an approximate measure of the value generated, which can help determine if an SEO campaign is worth the cost.
1. Return= Annual Traffic Increase X (estimated value of a visit)
If you estimate the value of a visit at worth 10 cents, you can multiply this by the annual increase in traffic. Say that you increase traffic by 1,000 additional visitors per month (12,000 additional visitors per year). The value could be equated to $1,200 per year. It is important to note that the effects of an SEO campaign can last years. If you assume that this traffic growth remains for the next 5 years, then the return over 5 years is $6,000. If the campaign costs $3,000 the ROI would equal 100%.
The value of a visit could be much higher if you are in a competitive field. Say that the cost per visit for a Google Adwords campaign is 75 cents. Since organic traffic tends to convert at a higher rate, you could estimate the cost of a visit as $1.00. This would increase the ROI to equal 1000%. If you are in an ultra-competitive field like college loans, a targeted visit could be worth $25 or more.
2. Return= Annual Leads Generated X (estimated value of a lead)
A visitor who comes to your site through Google search should be encouraged to fill out a form to provide their contact information. You can offer incentives like a free whitepaper, a free webinar, a free email newsletter, a free trial, etc to convert a visitor to a lead. You can estimate the value of a lead by determining the lifetime value of a new customer divided by the conversion rate of a lead to a new customer.
Say the lifetime value of an average new customer is $1,000 and you convert 10% of your leads into new customers. Then the estimated value of a lead might be $100. If you can track that an additional 100 leads were generated in one year by visitors coming from search, the value would be $10,000. If you assume that the rate of new leads is maintained for five years, the value would be $50,000. If the campaign cost $10,000, the ROI would be 400%.
It is important to note that any single metric like ROI can be problematic. According to Dr. Pete:
We just have to remember to never get so enamored with one metric that we neglect the big picture. Every web metric that has ever existed or ever will exist is missing some critical piece of information for some set of situations and has the potential to lead us astray.
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