Online marketing has exploded in the last decade. Companies are busy creating new content for new platforms, trying newer ways to make their content user and search friendly, and doing everything right. However, despite their efforts, they are not able to tie the ROI of their search campaigns to their marketing bottom line.
Companies expect more than traffic and rankings report from their SEO agencies or staff. They don’t care how many footfalls you had after a particular campaign; they care what they are getting against their dollar. If you are a SEO agency or a search marketer it is your responsibility not only to give them a search report, but also an estimated and actual ROI report.
Chris Panetta at WordStream, the top paid search company, found that they were having a hard time tying SEO with ROI. Their clients would come to them saying, “Well, we’ve been able to do X, Y, Z to get our conversion rate up from 5% to 7%, or boost our conversions by 150%. But our sales are down 5%. Our sales are down 3%,” or, “Our sales are only up 1%.”
This is a problem for any search company.
This is why we will discuss an easy way to measure ROI for e-commerce websites. We will touch upon both organic and paid search ROI, because many companies are also still having a hard time measuring paid search.
Organic Search ROI
Organic search is one of the most effective ways to get good results. However, it is also a time-consuming and content-intensive method and takes a great deal of effort.
One of the most important determining factors for measuring ROI for organic search is to decide the quotation based on the scope of work and time-frame for your campaign.
Let us understand this with an example. This is a rough ROI calculator that can help you measure the return on your SEO costs such as writing, research, and time.
Here I am assuming that the overall cost of an SEO campaign is $10 000, conversion rate at 2.5% and increase in traffic at a modest 5%, the double of initial conversion rate.
As per the tool my additional revenue, attributed to SEO activities, in the first year is approximately $18 500, this is after deducting the cost of campaign.
Based on this revenue, I can then calculate the return on search spend. There are several other tools to measure ROI in percentage. Here’s a simple formula to measure it yourself.
Additional Revenue – Cost of SEO Campaign / Cost of SEO Campaign = ROI
For our example: ($18 500 – $10 000 / $10 000) x 100 = 85%
So if you are investing $1 in SEO, you can easily expect $1.85 in return.
This tool can help you measure the ROI in percentage. You can use this tool to measure ROI, or measure it using the above-mentioned formula.
The above-mention example is very modest and shows below-average figures. A good SEO company should be able to achieve far better ROI through higher conversions and more traffic volume.
Paid Search ROI or ROAS
The reason everyone likes paid search is that the cost of campaign and the results can be easily measured. Google provides a goal conversion rate, which allows us to track everything from Twitter shares to actual purchases, and from newsletter sign-ups to YouTube views, and so on.
Despite that, the client will invariably ask for ROI, so we are back to square one. ROI for paid search is known as Return on Ad Spend or ROAS. It is measured differently than ROI. Here’s the formula for calculating ROAS:
Profit resulting after paid search campaign / Ad spend = ROAS
Again we will understand this with a hypothetical example.
Assuming you spent $37 000 on paid ads, or the overall cost of campaign was $37 000, and the additional revenue generated was same as organic search i.e. $18 500, your profit should be around $18 500.
So $18 500 / $35 000 = 0.5
Thus, your Return on Ad Spend or ROAS is 0.5 or 50%.
So for every $1 spent you will get $0.50.
The reason the ROAS is lesser than ROI for organic search is that paid ads are more expensive than organic search. An ideal ROAS is 100%. So you must strive to achieve at least that much.
So if you spend $1 for an ad, you must get at least $2.
However, this is easier said than done and I have seen many agencies failing to make their clients understand why they can’t deliver a positive ROAS.
Again, it is easy to measure this if your end conversion goal is sales. But what if your conversion goal is non-monetary such as newsletter sign-up, video sharing, or brochure download?
Under the circumstances, you must tie a value to the goal. For example, you could attach a dollar value for every newsletter signup. Let’s say you stand to gain $20 for every one person who signs up for your newsletter, if 5 000 people signed up for your newsletter, your overall revenue is 5 000 x $20 = $100 000.
Now divide this figure with the cost of the paid search campaign and you have your ROAS.
$100 000 / $37 000 = 2.702 x 100 (to put in % terms)
So the ROAS is 270%.
The value of paid and organic SEO is, at best, invaluable. However, it is not immeasurable. If you fail to see why your search campaigns are not bringing a good ROI, here are some possible reasons:
- You are not using long-tail keywords and phrases in your content
- You forgot to list negative keywords
- Your keyword group is too broad
- Your ad copy is not relevant to your campaign / visual
- Your targeted keywords are too expensive
The best way to measure the strength of a search campaign is to ignore vanity metrics like shares, sign-ups, and downloads, and look at actual impact on sales.
Connect with me
I have been doing search campaigns for quite some time now for my company and have seen some remarkable campaigns in my short stint. I hope you find this article helpful. You can hit me up on @avinair52 if you have further questions. I will be glad to be of help.