ROI: The Three Most Important Letters in SEO

Find the data. Love the data. Whoa, not that much. You're creeping us out.

For all of the talk you see on forums and various websites about the ‘best’ way to do seo, you generally hear very little discussion of the one metric that actually matters when it comes to search engine optimization: return on investment, or ROI. People are instead concerned with link volume, link quality, page structure, usability, traffic – in fact, just about every metric besides ROI.

Why? Because calculating those metrics is relatively easy, and calculating ROI can be time-consuming and frustrating. That’s the bad news. The good news is that it’s not nearly as extreme on either count as it might seem at first blush and that if you take on the work, you’ll immediately put yourself on a quicker path to profit, which is the point of SEO in the first place.

Disclaimer: This article offers a very basic approach to ROI. You can obviously go much, much deeper with evaluating the value of your various marketing and SEO efforts; here we’re only attempting to provide a basic framework for understanding and implementing the concept.

ROI? WTF?

ROI is a pretty basic concept. It just asks what the probable return on an investment is. In simpler terms, ROI asks this question: if you spend a dollar on ‘x’, how much profit will that dollar spent bring in return? ROI is commonly expressed as a percentage, rather than a specific number tied to your actual amount spent. So, if you spend a dollar on an ad and that ad brings in traffic that spends $2 on your site, your ROI would be 100% – for the dollar you spent, you brought in $1 in profit. If the ad only brought in .50 in sales, you’d have a negative ROI – to be specific, a ROI of -50%.

People use ROI as a way to compare different promotional efforts, site upgrades, and the like in an attempt to figure out the most efficient use of their budgets. While it’s not a perfect measure, it’s still one of the best tools that webmasters with small or one-man teams have to evaluate their marketing efforts, and operating without a sense of ROI is, in many ways, just flying blind – relying on luck to get you through.

Tip: Goals in Google Analytics make the process of establishing and evaluating ROI a lot easier. Learn more about Goals in this Google presentation.

ROI – Quick and Durrrrrty

How do you figure out your ROI for SEO? It varies from site to site, but here’s the basic to-do list.

1. Figure out what a visitor to your website is worth
   This is a number you should already have a sense of, but if you don’t, you need to. Again, the specific way to do this is different for every website, but however you do it, you need to establish a baseline number for the average revenue you expect to generate from a single website visit. If you’re really lacking a method, the absolute ugliest way to generate a number is to take your absolute unique visitors (make sure it’s absolute) in your stats for the last 12 months, your revenue for the last 12 months, and divide the revenue by the users. If you can’t generate a number because you’re a new site, try posting on PAL and seeing if someone won’t steer you in the right direction regarding typical visitor values
2. Figure out what a visitor from a search engine is worth
   Whatever process you used for Step 1 you’ll probably be employing again here. Separate your traffic from search engines and do your best to break out the average value of a visitor from a search engine. Why didn’t I just make this Step 1? Basically because I think it’s important for you to understand the gap (or lack thereof) between the quality of your search engine traffic and your other traffic – it might be an insight that really changes the way you market your website.
3. Figure out what specific terms are worth
   Not all terms are created equal. I think we can all agree that a visitor who comes to a rakeback site after clicking on a search result for “FullTilt Poker Rakeback” is far more likely to convert into a revenue-producing visitor than someone who comes to your site via an image search for “PokerStars logo”. If you don’t want to dig through your stats and establish a specific value for each term you’re pursuing, at least divide the terms by some bad-better-best style ranking system.
4. Segregate Your SEO Efforts
   It’s impossible for you to know if SEO tactic ‘x’ is working if you don’t have that tactic focused on a discrete goal. I know that it’s uber-tempting to focus all of your SEO efforts on your “money page” or most-desired search term, but that process only muddies the waters. How can you tell what’s working and how well it’s working if you don’t assign specific goals to specific efforts? You can’t. Have some patience and set up small experiments for your efforts that will help you to better analyze each individual effort’s quality and efficacy.
5. Track SEO Costs
   Do not lump your SEO costs all under one heading. Keep a separate record of your expenses for each individual campaign. Also, do not forget that your time is a cost – assign some hourly value to your work and be sure to track your hours and include the cost of that time in your records. I’ll say that again because so many people ignore it: the cost of a SEO campaign is determined by the money you spend and the value of the time that you spend. I can’t tell you how many people I know that think some SEO strategies are ‘bargains’ because all they take is time. That logic is flawed, and the sooner you start quantifying the cost of your time, the better off you’ll be.

Bringing it All Together

Once you have estimates for your values described above, the rest is pretty simple. Track the traffic increases you see for particular terms in a spreadsheet and use that data to evaluate the relative ROI of various SEO efforts.

Here’s an example. Let’s say you were after three keywords: poker home game rules, PokerStars deposit bonus and omaha tips. For poker home game rules you tried a campaign of mass article submitting; for PokerStars deposit bonus you purchased some links and for omaha tips you went grassroots and only did link directory submissions and blog comments.

Here are some hypothetical numbers you might generate:

poker home game rules
average visit value: .20
money spent: $100
time spent: $100 (10 hours at $10 / hr)
traffic increase since campaign started: 5000 visits
revenue increase: (visitor value * traffic increase) $1000
ROI: ( (revenue increase) / total cost (money+time) ) * 100)
ROI = (1000/200)*100 = 500%

omaha tips
average visit value: .03
money spent: $50
time spent: $400 (40 hours at $10 / hr)
traffic increase since campaign started: 15000 visits
revenue increase: (visitor value * traffic increase) $450
ROI: ( (revenue increase) / total cost (money+time) ) * 100)
ROI = (450/400)*100 = 112%

Even from the made up example above, you can see the power of understanding ROI. A campaign that generates more traffic might not be the best campaign, as in our illustration.

ROI’s ROI

There are a few things you should absolutely keep in mind before you go all nutso with ROI. The first is that it’s just one tool in your box for evaluating a particular campaign. While profit is a great metric, it’s not the only metric, and focusing singularly on it can lead you to make some short-sighted decisions.

The second is that ROI is not a short-term tool, and you shouldn’t be using day-to-day ROI as a platform for decision making. You need a good amount of data – weeks, if not months, to properly evaluate SEO efforts, and if you try to determine the value of a campaign too quickly, you run the risk of relying on useless data. This is a long-term project, not something you can set up today and then draw conclusions from tomorrow.

Another relevant thought: ROI is only as useful as the data you give it, so if you’re not carefully generating quality numbers for your ROI model, you might as well not bother.

Finally, to echo the disclaimer at the start – remember that the complexity of your system for measuring ROI should be appropriate for the complexity of your site, your product and your efforts. Don’t under-or-over-do the system, or you’ll find yourself frustrated with the process. Hit the sweet spot and you’ll have a system that can save you tons of time and aggravation by giving you the one thing webmasters need more than anything else: accurate data about what helps them make money.

Tags: search roi