SEO Return On Investment

I am pretty active on LinkedIn and have been for quite some time. I really do my best to try to answer one question per week and participate heavily in that community. It’s a good way to connect with others, make contacts and also use it as a sounding board for input to my ideas and thoughts on SEO, Search Marketing, Internet Marketing and what I do for a living both with Honeypot Marketing and with my own projects. I figure since I am posting there I should also share some that with this audience. So the question that was posed from LinkedIn was this: “How can you calculate the ROI of further SEO Investments for online project? Is there a model that can be used?“ That is a darned fine question since typical ROI models do not stand up well when it comes to SEO and Organic Search for a couple of reasons:

1. Investments are indirect. You invest in link programs, content etc and it doesn’t directly drive traffic. The engines drive the traffic but the investments are there to help increase your authority in those engines. It confuses alot of people as to the logic.
2. Most companies fall flat in terms of customer acquisition models. They are not correctly tracking a converted visitor from search, which makes it impossible to optimize your converting terms from the engines. I have seen many instances where terms which you wopuld not think are big converters in fact are massive converters (especially in tail of search). If you dont know this information then throw out your ROI model, you’ll be guessing anyhow - you could lie I suppose but then again that would be even worse and since SEO’s never ever lie (I’m ducking from the lightening!) that would never be a problem.

Given those two factors I’ve come up with a fairly decent model that I find works and here for your viewing pleasure is the overview. If you disagree with me or if you think I’m wrong then register and comment or email me. One of the key things to consider is that calculating ROI on Organic Search is different than traditional media. Here is the layout I utilize: A Total Amount of Search Traffic B Total Amount of Converting Search C Conversion Rate from Search C Life Time Value of a Conversion (is it CPA or LTV) D Converting Terms (focus on these) Determine total Search Traffic = 1000 Determine the Converting Search Ratio: B/A (10/100) = 0.10 Use the Total Converting Search Numbers = 100 Determine the value of the Conversion: C = $200 You have profited $20,000 from organic search. Total current budget : Link Building $1500 per month plus other monies spent (I am not sure what these are)/ Your profit of $20,000 from all search engine optimization programs is being generated by $1500 of spend to acquire 200 customers. Your cost per customer is $7.50 Your spend is generating a 13:1 profit to cost ratio. Now you know your budget to work with and you can shift your overall tactics to increase the overall number search joins as you wish. I’ve used this model (with much more detail) successfully in the past on numerous projects in the online gambling industry including online sportsbooks, casinos, generic ecommerce sites, online dating, lead generation and ebook marketing industries. It provides for a strong ROI model, justifies SEO budgets and keeps the business people happy since they understand what the goals of the program really are. I would love to get your input, comments and suggestions on expanding the ROI model for Search Engine Optimization. Please comment below and let know, even if you think I'm completely wrong! Cheers, Dan