ROI of SEO for Small Business (Let’s Crunch Real Numbers)
This post is part of our OWNER’S MANUAL for DIGITAL MARKETING series – a guide for small business.
Today, we’re going to look at some hard numbers.
To calculate the ROI of SEO from multiple angles.
We’ll start by looking at click-through rates for each of the top 20 positions in Google.
So you can estimate the increase in website traffic you’d gain from a first page Google ranking.
We’ll look at the value of SEO-generated traffic compared to the cost for the same amount of paid traffic.
And finally, we will look at ROI.
And give you a formula to calculate the ROI of SEO for yourself or for your clients.
If your website is buried on page 3 (or beyond)…
Or even if your website ranks for several keywords…
…on page 2.
Or if you’ve ever wondered:
- How much traffic could I get if I made it to the first page of Google?
- How much traffic could I get if I was ranked number one?
- Is SEO worth the time or investment?
- Would SEO actually pay for itself?
You’ll want to read this guide.
First, Some Quick Stats (And a Story)
ONE – A whopping 96% of all Google traffic goes to websites on the first page
TWO – 75% of Google users don’t even click past the first page of results
THREE – The #1 search result in Google gets clicked 25.8% of the time
FOUR – The #10 search result in Google gets clicked 1.3% of the time
A while back…
I set out on a quest to discover what really happens on the first page of Google.
To understand who gets clicked on.
To understand the value of a first place organic ranking.
A second place ranking.
A third place ranking… or a 7th place ranking.
I was looking for a good, comprehensive and current research study outlining the click-through rates (CTR) for each position in Google.
I read dozens of articles and research reports highlighting first page of Google statistics.
Before we dive into what I discovered…
Let’s clarify some definitions.
What exactly is click-through rate, and how is it calculated?
CTR is the number of clicks received compared to the number of times a link to your site is seen in Google.
Google defines click-through rate as: “the click count divided by the impression count.”
An impression is defined as: “how many links to your site a user saw on Google search results, even if the link was not scrolled into view.”
It’s important to note that the user must visit the page on which your link resides to see an impression.
So, if you are ranked on page two, but the user never scrolls past page one in Google, the impression is not counted.
Here’s an example CTR calculation: If you had 200 impressions, and you received 10 clicks, your CTR would be 5%.
Click-through rate is calculated for every single keyword, and is shown in Google Search Console reports.
It’s a very important metric to track in search engine optimization and critical for estimating SEO ROI.
Organic CTR Studies
Several studies have been done, using different methods to measure estimated CTR by search engine position.
AOL was one of the first, releasing data in 2006 that showed – a number one position in AOL gained 42.3% of all click-throughs.
Several more CTR studies have been done in subsequent years.
The best study I’ve found is one that’s constantly updated with fresh data each month.
I discovered it while reading an article from Smart Insights about organic click through rates by search engine position.
It’s called the Google Organic CTR Study by Advanced Web Ranking.
From May of 2014 through today, Advanced Web Ranking has shared CTR data from a log of click-through rates it keeps for subscribers of its keyword ranking tools. This study is ongoing.
Current data for the CTR study measures over 1,800,000 keywords pointing to 53,600 different websites.
The CTR study shows a history of Google organic click-through rates and how they have evolved over time.
And it breaks information down by device type, business category, search intent, keyword length, etc.
The study shares statistics about each position on the first page of Google, the second page of Google, and the top position (number 21) on the third page of Google.
Today, we are are looking primarily at the CTR for “Unbranded” keywords.
Unbranded keyword searches do not include the business name in the search term.
This data set eliminates skewed results from people specifically searching for a business name and subsequently clicking the first result.
For example… A branded search term would be “Visigility”.
While an unbranded search term would be “digital marketing tulsa“.
Check out the difference between branded and unbranded CTR.
The growth potential for companies using SEO for small business lies with people searching unbranded keywords, like:
- swimming pool companies
- roofing contractor tulsa
- restaurants near me
- industrial control panel design
- buy store fixtures
- how to keep a dog cool in a car
So to help you understand how much SEO could help increase traffic to your website, let’s look at the click-through rates for each of the top 20 spots on Google.
Google Organic CTR for Top 20 Listings
- # 1 25.78% 25.78%
- # 2 17.00% 17.00%
- # 3 11.13% 11.13%
- # 4 7.60% 7.60%
- # 5 5.45% 5.45%
- # 6 3.97% 3.97%
- # 7 2.96% 2.96%
- # 8 2.27% 2.27%
- # 9 1.72% 1.72%
- # 10 1.28% 1.28%
- # 11 1.01% 1.01%
- # 12 .87% .87%
- # 13 .78% .78%
- # 14 .68% .68%
- # 15 .65% .65%
- # 16 .66% .66%
- # 17 .58% .58%
- # 18 .52% .52%
- # 19 .44% .44%
- # 20 .37% .37%
As you can see from the chart, there is a reason why Google’s number one spot is so highly prized.
According to the data…
- A #1 ranking would give you a 52% traffic boost above a #2 ranking
- A #1 ranking would also give you a 373% traffic boost above a #5 ranking
- On 1,000 searches, a #1 listing should yield 258 clicks
- While a #10 listing might yield just 13 clicks
The increased website traffic potential is huge with each SEO-driven boost in ranking.
Let’s crunch some more numbers
Your website is currently ranked for a keyword that gets 300 searches each month in Google.
But, it’s ranked on page two at position #15.
Since you’re on page two of Google…
Your listing may only be seen by a fraction of the 300 people searching for your keyword.
(As we learned earlier)
Some studies estimate 75% of Google users don’t go beyond the first page of search engine results.
Leaving only 25% of searchers that actually visit the second page.
According to the chart above, (at position #15) you can expect to receive a click-through rate of 0.65% for people who see an impression of your listing.
Let’s do the math:
300 (Searches) x 25% (Visits to page two) x 0.65% (CTR) = 0.49 Clicks
So, for a keyword that gets 300 searches per month, at position #15, you can expect approximately 1/2 of a click per month.
Yes, you read that right – one half of one click per month.
What if some basic website SEO helped boost your ranking to #10 in Google?
Let’s redo the math:
300 (Searches) x 1.28% (CTR) = 3.84 Clicks
Moving up 5 spots from #15 to #10 yields a 684% increase in website traffic.
(Note – page one does not receive a drop in impressions, because everyone sees page one.)
What if some aggressive website SEO helped you rank first in Google?
Here’s how it would pay off.
300 (Searches) x 25.78% (CTR) = 77.34 Clicks
Moving up 10 spots from #15 to #1 yields a 15,684% increase in traffic.
That’s just looking at one keyword phrase. 77 Clicks per month from one keyword isn’t too bad.
What if SEO delivered multiple keyword rankings?
You rank for 20 keywords that each get 300 searches per month. In total, the number of monthly searches for your keywords are 6,000.
If these new rankings sit in any of the top 3 positions in Google…
…you could expect at least 334 visitors per month to your website – from organic Google traffic.
For this estimate, I’m using the CTR for position #3.
Although, some of your rankings could be higher.
6,000 (Searches) x 11.13% (CTR) = 334 Clicks
If you have a few higher ranked keywords, then you’d likely get more clicks.
In truth, when SEO helps you rank for 20 keywords in the top 3 positions in Google, you will also rank for hundreds of additional keywords in varying positions on the first several pages of Google.
And though these additional keywords may be ranked lower than the top 3 in Google – in total, they will deliver several more clicks themselves.
Estimate traffic boost with your own numbers
To estimate how much traffic you might gain by using SEO to get your website on the first page of Google, you need to do a little research.
You need to know how many searches per month are performed in Google for your target keywords.
If you don’t know this already…
- Make a list of target keywords for your business
- Research how many monthly searches your target keywords receive in Google
- Plug the numbers into the formula
You can find the estimated number of monthly searches for your keyword by using the Google Keyword Planner.
Fortunately, several people have already written good tutorials on how to use the Keyword Planner for research.
Here’s a great guide on how to use the Google Keyword Planner.
After you get search volumes for your keywords, plug the numbers into the formula below:
Number of Searches x CTR% = Clicks
Next, let’s look at the SEO value of all this extra traffic.
We’re going to look at two different models to estimate the value of SEO.
…to help evaluate if SEO is worth the cost or time investment to boost rankings.
The Value of SEO in AdWords Terms
First, we’ll compare SEO to AdWords
If you advertise with Google AdWords (or some other type of paid search advertising), you will generally pay per click or impression.
You pay to put your listing near the top of Google, and the listing is marked with an “Ad” icon.
With good SEO, your search engine listings appear in the natural search results below the ad. And you get free organic traffic from Google.
It’s great to be listed near the top of Google in natural (organic) listings.
Does it get you more traffic.
But it also boosts your credibility.
It increases the authority of your business.
And makes you the go-to source in your industry.
If you pay per click, you pay each time a Google searcher clicks on your ad. These clicks can range from a few cents to several dollars per click.
According to a recent WordStream study, the average cost per click (CPC) across 20 major industries is about $2.32.
This is average, though several competitive keywords can easily cost in the range of $50 or $60 per click (even in Tulsa).
The most competitive keyword of all…
“Best Mesothelioma Lawyer” ran $935.71 per click in 2016.
The Ad Value of a #1 Organic Ranking in Google
The chart below shows how many clicks you might expect from a solid #1 position, along with the related cost you would pay for those clicks for varying levels of CPC ad rates.
If you are targeting search terms that total 1,500 searches per month.
You could normally expect 387 clicks from being first in Google.
The same 387 clicks would cost $1,160 at $3.00 per click.
The SEO value of a number one position goes up significantly if you are paying for more competitive keywords.
As you can see from the chart – if you are spending $15.00 per click, the same 387 clicks would cost $5,801.
If you want to run a deeper SEO ROI analysis (using current Google Search Console search analytics) to determine the PPC value of your current organic traffic, take a look at this.
The Value of SEO in Terms of ROI
Return On Investment is a calculation that illustrates what you gain as a result of what you invest.
Pure ROI = (Gain – Cost) / Cost
If you gain $100 at a cost of $50, your ROI calculation would look like this:
($100 – $50) / $50 = 100% ROI
How do you measure the ROI of SEO?
Your “Gain” is the Lifetime Value (LTV) of a new customer.
Your “Cost” is the Customer Acquisition Cost (CAC) – or the cost to acquire a new customer.
How do you calculate LTV?
Simply put, LTV is an estimate of lifetime gross profit earned from each new customer, including future business.
Here’s how it works:
Plug in your own numbers to calculate LTV.
You run a pool service company…
And your customer spends on average $80 per month for services and chemicals to maintain their pool.
You deliver excellent customer service, so you can expect the average customer to stay with you for 5 years.
And, your gross profit margin runs about 38%.
Your LTV numbers look like this
- Purchase Per Year – 12
- Average Purchase Price – $80
- Years as a Customer – 5
- Gross Profit Margin – 38%
…and your LTV calculation would look like this:
LIFETIME VALUE = 12 x $80 x 5 x 38% = $1,824
Next, we’ll look at the SEO customer acquisition cost to gain a new customer.
How do you calculate CAC?
Customer Acquisition Cost is a metric that helps business owners know how much it costs to get a new customer.
It’s helpful to keep track of CAC for different types of marketing or promotional activities.
So you can figure out what works…
And what offers the best bang for your buck – the best ROI.
In this case – you might have one CAC associated with billboard advertising and a different CAC associated with SEO.
Complete or “fully-loaded” CAC goes beyond obvious promotional investments in advertising, AdWords, SEO, social media advertising, and social media management.
Complete customer acquisition cost may also include the rest of “what it takes” to get a new customer.
Expenses like: sales commissions, sales and marketing staff salaries, business expenses associated with sales and marketing, etc.
For our purposes (calculating the ROI of SEO), we are looking at a simplified version of CAC, so it’s easy to compare SEO to other marketing channels.
The formula looks like this:
SEO Cost / New Customers = CAC
If we plug the LTV and CAC into our ROI formula, it would look like this:
SEO ROI = ($450 – $50) / $50 = 800% ROI
Customer Acquisition Costs vary widely by industry. If your LTV is $1,824 (as shown in the pool company example), you might be willing to shoulder an CAC of $200 – $300 (or more) to gain a new client.
It all depends.
Your marketing budget may allow more tolerance for a higher Customer Acquisition Cost initially because typically the CAC associated with SEO drops over time as rankings improve.
The value of a new client often extends beyond the LTV of that one customer. Sometimes they bring referrals or offer a review or do other things to add value (or more revenue) to your business.
The CAC formula is very simple.
What’s harder is determining which leads and new customers actually come through SEO efforts.
How do you know if a new customer was gained through SEO?
As with other types of marketing – when it comes to SEO – it’s sometimes difficult to correlate SEO efforts as the lead source for a later customer purchase.
As buyers become more sophisticated with how they research products and companies, the exact path a person takes from – Discovery “first exposure” to your company to Purchase “become a customer” of your product – becomes harder to pin down.
Customer journeys are rarely linear.
And SEO affects research, discovery, and trust-building… very early steps in the purchase process.
Take the following scenario for example:
Jim just moved into a house that has a pool.
He’s never owned a pool before, so he thinks…
“I better figure out how to take care of this pool. I don’t know what I’m doing.”
He goes to Google and begins searching things like, “how to maintain a pool” or “pool maintenance schedule”.
He clicks a link to your website and reads an article on your blog.
He learns some things.
So he reads some more.
He also visits a few other website to see what other companies have to teach him about pool maintenance.
Then he thinks, “Hmmm… that first company really knew their stuff. I think I’ll stop by there on the way home from work this week.”
Or maybe he picks up the phone and calls you.
Or maybe he visits your Facebook page and sends you a message.
Or maybe he emails a link to himself to contact you at a later date.
Or maybe he fills out the form on your website.
Unless your business is entirely online….
The best thing to do is just ask how they first learned about your company.
And, as a good SEO campaign begins to take shape, you should notice in coming months:
- New keywords being ranked
- Increased keyword rankings
- Increased average position
- More organic website traffic
- More direct website traffic
- More phone calls
- More emails
- More foot traffic
- Quicker sales cycle
First Page Rankings Take Time
Getting to the first page of Google with SEO takes time. Sometimes months depending on the keyword you are targeting.
And getting to the number spot in Google is even harder.
In some industries, companies are pouring thousands of dollars each month into SEO to improve website rankings for competitive keywords.
Increased website traffic means increased business.
The rewards (most of these companies have decided) are worth it.
Now It’s Your Turn…
Hopefully, this guide has given you a better understanding of the potential traffic that lies on the first page of Google.
If you have any questions at all or anything to add…
Leave me a quick comment below.
I’d love to hear from you.