For many organizations, marketing exists to drive leads and sales. There are many tactics for generating leads and conversions, but SEO is usually part of that mix. Without measurements, SEO can be difficult to justify as a marketing channel. By looking at the right data, you can better justify your SEO efforts.
If you’re responsible for SEO, then measuring its return on investment (ROI) is critical to proving that it’s working and that it should continue to be a key part of your marketing strategy.
Why is SEO ROI so important?
It helps you justify SEO as part of your marketing strategy – if the website isn’t meeting its goals, then it makes sense to stop investing resources into an activity that isn’t working. It helps influence business leaders – the ability to show positive ROI demonstrates the value and increases the likelihood that executives will invest additional resources into the channel. It provides direction for future investment – businesses need to know which investments are driving returns before they can scale those initiatives. Without measuring SEO as a channel, it’s difficult for companies to know which investments warrant increased investment or scale. It helps influence future SEO strategies – if you have a solid understanding of which keywords are converting and bringing in revenue, then it sets the stage for more targeted SEO strategies.
A few years ago, I set out to find the most effective way to calculate return on investment for SEO projects. Here’s what I found…
Marketers have created many models for calculating ROI, each with its own benefits and limitations depending on the timeframes being measured and other variables. A model put together by Endeca Technologies is representative of these formulas:
The simplest ROI formula you can use is your total marketing budget divided by 3 (representing costs, profits lost due to opportunity cost, and profits gained due to sales). You can use this equation to get a rough approximation of your SEO ROI.
While the equation above is helpful, it doesn’t allow you to drill down into specific keywords or take other factors into account. Let’s look at how you can better calculate your ROI for SEO.
So what are some ways that marketers are calculating their SEO ROIs? Let’s break down some of the most popular tactics…
SEO Cost Per Acquisition (CPA) This is where Google Analytics comes in handy by providing data on conversions and transaction values for each keyword. You then work backward from there to determine the cost per conversion attributed to traffic from each keyword. Before diving too deep, keep in mind that this model works best if you have an eCommerce site with unique product SKUs (stock-keeping units).
If your site doesn’t sell individual products, this model isn’t as useful.
If you do have eCommerce data in Google Analytics, then here’s how to use it:
Set up a secondary dimension in your Google Analytics acquisition report to show the keyword that drove traffic. You can do this by adding Acquisition > Secondary Dimension > Keyword Match Type.
If you don’t have data for unique product SKUs, then you can estimate using Google’s estimated values.
Either way, it requires some manual work to get the most out of the data. If you’re just looking for an estimation of ROI with no additional detail, I recommend checking out Estimable.
Additionally, keep in mind that these cost-per-conversion estimates will only look at immediate conversions (ones occurring within 30 days of clicking on an ad). This doesn’t incorporate customer lifetime value since most customers purchase again and over time. That said, if a conversion occurs within a month of clicking on an ad, it’s a pretty safe bet that this is a customer you want to keep.
So what are the benefits of calculating ROI using CPA? It can incorporate other advertising channels like search engine remarketing (SERM) and display campaigns if you include cost data for those initiatives. It also lets you drill down into specific keywords and see which ones are driving conversions.
The main downside is it only captures direct sales while excluding repeat purchases (and long-term value). If your business sells products with average order values greater than $100, then it’s probably worth taking this into account.
SEO Value Per Acquisition (VPA) This method uses like CTRs or rankings in Google to determine how much value a given keyword is bringing in. In the simplest terms, it’s CTR * CPC.
This strategy works best for keywords with high commercial intent – if someone searches for your page specifically because they want to purchase your product or service, then Google sees this as highly valuable and will often give you a top rank. This also tends to work better for individual products/services rather than a brand or company name.
Since this model doesn’t consider costs, it can be misleading at times since some keywords aren’t necessarily profitable (i.e., people searching for negative reviews of your product). You’ll need to keep track of which pages are receiving traffic from specific keywords so that you don’t over-value them when calculating your ROI.
Otherwise, you could end up with a skewed view of your SEO progress.
There are a few extensions that offer this type of calculation: Moz’s Open Site Explorer provides the estimated value from organic traffic from any given link or site, while Serpstat can look at how many clicks your page is getting in Google. If you don’t have access to detailed search query data, then either tool will give you a pretty decent approximation of how much your keyword is worth in terms of SEO value.
This method makes it easier for marketers to track down high-value keywords and prioritize them over low-value ones when working on an editorial calendar. However, it doesn’t touch on conversions or the side of things. To get a better idea of the value your keywords are bringing in, you’ll need to run a separate ROI calculation using CPA.
Although there are other methods I didn’t cover here (average order value, cost per sale, etc.), these are the two most common when it comes to calculating ROI for search engine marketing efforts. There’s no right or wrong way when it comes to assigning value to specific keywords, but in today’s SEO climate, you should always have some sort of data-backed assumption behind your decisions in order to set up an accurate budgeting strategy for the future initiatives.
Roi calculation using Google analytics.
Google Analytics is a tool for collecting and analyzing data related to website traffic. It could also be used for mobile app tracking through the mobile application program interface (API). In this paper, manual calculation of ROI will be done by using google analytics web traffic source report. One of the reports that you can get from your google analytics account is the Google Analytics Traffic Sources Overview report. This report provides a quick overview of where your website visitors come from or what sources they use to link to your site.
The Google Analytics Traffic Sources Overview Report shows information about top referring sites which include both Search Engines and Direct visits. From the Top 4 Referring Sites below screenshot, we can see that three are referrers from search engines while one is a referrer from direct visits.
In this report, you can also see the number of visits from search engines along with their bounce rates. The Google Ads Keyword Planner Tool is a free tool provided by Google that provides keywords related to specific products or services which you can get through your google analytics account. In this paper, we will be using the data from the Google Ads keyword planner tool then do the manual calculation for ROI.
First, you need to log in to your Google Ads account. Then click Tools > Keyword Planner on the left-hand menu. You can also get a keyword planner tool link through your google analytics report by clicking the dashboards tab and searching for keyword traffic. Once you are in the Keyword Planner tool, select how much data you want to see from the performance of keywords that people use in search engines related to specific products or services then input it.
By default, Google only displays three match types or keyword qualifiers that influence organic rankings including Broad, Exact and Phrase match types. Most of our manual calculation will be conducted with broad match type since it has the most number of keywords included in our Google Ads plan. As seen in the screenshot below, the broad match type has 1.77 million keywords to choose from while phrase and exact have only 900 thousand and 300 thousand respectively.
Note: Do not change the default setting in order to get accurate keyword data to calculate ROI for search engine marketing efforts since it will show you a different number of keywords with different match types.
To get an idea about how much these keywords are worth then we need to set up conversion tracking first. After setting up conversion tracking on your website, go back to your Google Analytics account date range selection tool then click on the custom date range button as shown on the screenshot below.
Then select a specific date range that you want to check how many referrals or visits came from a specific Google Ads product or service. In this paper example, we will use a specific date range.
To get the keyword data, click on Acquisition > Google Ads and select traffic sources as seen on the screenshot below.
Next, choose Source/Medium for your search engine marketing efforts through Google Ads then set up filters for conversions that you want to track by using the goal option in your google analytics account.
For example, I want to track goal conversion based on e-commerce products or services that people bought or viewed through organic search results so I need to apply a filter first. To do so, simply open the Google Analytics Account tab within your Google Analytics interface then click on the view settings button as shown in the image below under the personal information section. Set up a filter for e-commerce and select Non-Interaction as the value for this filter.
By setting up this filtering, Google Analytics does not track or count views of product pages or checkout processes within your website as conversions. This is important if you want to calculate ROI (return on investment) accurately based on organic search engine optimization efforts because it minimizes fake data which will skew calculation results.
As shown in the screenshot below, we only need to set up an automated tagging process by pasting code into the HTML page that we want to track events then clicking the save changes button under the view settings section. Make sure to copy and paste the script exactly without any spacing between lines since it may affect tracking implementation.
Under traffic sources > source/medium, you need to select the specific search engine marketing efforts through Google Ads that you want to track. In this paper example, we will choose Google organic for January and February 2015 since it has the most number of keywords in our Ads plan.
Note: If your website uses different or multiple hosting then makes sure to input all http:// or https:// variations into the traffic source search box in order to get more accurate tracking data for keyword from various sources including referral links from blogs, social media sites, and other sources.
In this document example, we only have a few keywords under google organic so there is no need to check selected filters at the top of the page after pasting code on the Html page. To see how many clicks came from organic SEO click on search traffic > keywords as shown on the screenshot below.
After seeing a few clicks from organic SEO which is google, we can now calculate how many conversions came from each keyword using Google Analytics reports under the eCommerce section as shown on the image below. In this example method, we only need to follow path Conversions > Ecommerce and select order value as average order value since it has the most accurate result when compared to other methods above with fewer data available for conversion tracking due to the limited period of time selected. However, if you have more than three months of date range then you may choose a different field that suits your needs or is applicable based on industry type and business type.
To get a number of conversions by keyword for our ads plan for January and February 2021is as follows:
(number of conversions per keyword) x (number of total clicks from specified source/medium) / 100 = (average number of conversions per click)
For example, we have 106 keywords in our Google Ads plan that generated 13,908 clicks during the date range selected (Jan 1- Feb 28th). The average number of orders per click for this period is 8.9024 which means our Google Ads campaign generates revenue ($) based on this result.
Now you can calculate your cost per acquisition by using the following equation:
(total cost – total revenue) / total cost = average CPA ($)
In this case, the average CPA will be calculated as follows:
($590,605.00 – $19,928.11) / $590,605.00 = $3654.42
In conclusion of this Google Analytics tutorial on how to track organic SEO conversions for eCommerce websites using Google analytics together with Google Ads plan data, we have found out that our Google Ads program generates a cost per acquisition ($) of around $3,654 which is a lot more expensive than the average order value per click received from organic search engine optimization efforts of about $8 (average number of conversions per click). Therefore, it will be wise to focus more on improving the quality score and relevance of keywords when setting up Google Ads campaign in order to lower your cost per acquisition dramatically to improve ROI in the long run.
The most common reasons for high CPA, in this case, can be due to:
bad or irrelevant keywords, bad ad texts, and bad landing pages which all need to be improved with better CTR and relevance.
The effective daily budget for Google Ads is around $400-500 per day when starting out with a brand new account
Use Quality score (QS) as the main metric instead of CTR when optimizing Google Ads campaign
Goals-based bidding is usually better than time or manual bid options offered by Google Google Ads
It takes twenty-one days on average before a paid search ad generates the first click and performs best in the middle of the week (Tuesday and Wednesday) according to several studies done in the past few years
The average cost per acquisition (CPA) is the total cost of all your campaigns and is divided by total conversions. This will tell you how much you’re paying on average for each conversion that comes from your Google Ads account. Sometimes marketers and business owners like to focus on simply the cost per click as those are the only numbers reported by Google, but this can be misleading as it doesn’t take into consideration final sales at all. Also, it’s important to keep in mind that Google Ads also takes into account other factors such as Quality Score which can affect why a particular keyword may charge more than another one even if they have similar bidding prices.
To calculate CPA using Google Analytics:
- log in to your analytics reports page.
- Click on “Conversions” under the Analytics column of your views.
- Click on “Multi-Channel Funnels”.
- Make sure you are in the “Assisted Conversions” report by clicking on the report name in the top left of the page, then click “Segment” next to the view button and uncheck “Non-assisted Conversions.”
- Click on any time period that has data available (at least one week), then click apply button.
- Choose desired conversion categories (i.e., ‘Purchases’).
- Choose desired conversions (i.e., ‘All Purchases’).
- Save a new view that will populate all the relevant data.
- Click on “Advertising” under the “Acquisition” column to sort by CPA, CPC, ROAS, etc…
- Find your keyword(s) and take best performing keywords with the highest conversions AND lowest cost per acquisition (CPA) which will give you the most bang for your buck.
To conclude, using the Google Analytics CPA report is one of the best ways to determine how much you’re paying for each conversion on your current Google Ads campaign. It’s important to remember that even if you have a high cost per click (CPC) or lower Quality Score (QS), this doesn’t necessarily mean you will be overpaying for every conversion. The CPA will give you a better view of whether or not there are any serious issues with the performance of keywords and/or landing pages that need urgent attention. In addition, if your site offers multiple products then don’t forget to keep track of results from those as well as they may have higher conversions but still charge more than others because their average order value might be higher.