How To Calculate ROI for Link Building

By Tom Buckland | Case Study

Sep 13
Professional link building service

Why Building Links Is Incredibly Important In 2018

Calculating the value of a link is something I’ve talked about a lot on my personal seo blog. Aside from the fact that metrics nowadays aren’t all that good and calculating the value of the traffic through a link is almost impossible (at the scale we build links at) the greatest way to calculate a link building campaign’s return on investment, in my opinion is to use the increase in top-line revenue based on the increase in organic traffic.

I wanted to start by showing some stats of a start-up we are working with. They came up when they first launched a month back and we’re getting some nice results already for 1 key reason: It’s super-easy to track.

There are 2 main methods you can use to estimate return on investment when it comes to organic rankings. The first is for sites that are already semi-established and have traffic coming into them already. This involves setting up Google analytics PROPERLY, which is something we will talk about first up. The other method is essentially doing the same thing but estimating based on market data.

Both methods in the past have actually provided very accurate return on investment estimates, which 6-12 months later we have been able to verify once the increase in organic traffic actually occurs!

Google Analytics Revenue Estimate

This technique involves estimating increased organic traffic based on the value of organic traffic already going to the site. For this to work you must have Google Analytics set-up correctly, otherwise you won’t be able to put a concrete figure on how much value an increase in organic traffic will bring you.

For Ecommerce sites this is usually pretty easy and you can connect GA to shopify, Woocommerce, bigcommerce and most others automatically without any technical knowledge. This will then show you Ecommerce VALUE for traffic, which is what we need to get started. It will look something like below when you look into acquisitions -> channels.

Organic Traffic Screenshot

As you can see GA breaks down everything from paid, organic, direct, social and referral to give us some really nice data to work with. It also gives us a great platform to estimate organic traffic growth potential.

In this case for example we can see that organic traffic for the month of November 2017 was approximately 19,000 sessions. Which equalled an Ecommerce revenue figure of €18,000. We can also look back at the last 6 months and take the 6 month figure and divide that by 6 to get a more accurate estimate of the value of search traffic. In this case the AVG for the past 6 months from organic traffic alone was slightly higher than the November average and equalled €22,000 with an average of 18,000 sessions per month. This is the figure we will use in our estimates.

Assuming that approximately 18,000 sessions = €22,000 in topline revenue, we can estimate the value based on some keywords they are already ranking for and using part of the method below integrated into this campaign.

What’s amazing for this client is they actually have never done any SEO! And if you look at the Ahrefs stats, they estimated approximately 5,000 organic visitors a month with a traffic value of only $1.7k! This is one of the reasons why you need to be very very careful with tool based metrics.

Return On Investment Part:

This client is on a £3,000 [750 prospect] link building service campaign, for now I’m going to state this as 3,000 Euros per month just for maths sake.

We know that 18,000 sessions = €22,000 in revenue. This means every 1,800 = €2,000. And 180 = €200. Almost a 1-1 conversion rate, but the traffic to revenue multiplier in this case is 1.11. This is a very important metric.

Based on the positions they are already ranking (just looking at the first page results) if we pushed every keyword up only 1 space per month that would result in around a 10% overall increase in traffic per month!

This metric is calculated based on the click through rate of websites in this specific industry. Without getting too technical if a website ranks #1 in Google for a specific keyword it will get roughly 35-40% of the search traffic for that keyword. If it is #2 it will get about 15-25% and so on. Image below from smartinsights explains this quite well.

CTR

For sites that have never implemented a link building or SEO campaign before you can increase organic traffic by as much as 100% a month, month after month. For more established sites we aim for between a 10% increase, depending on the niche and competition. Although in some cases we do generate well over 400% within 6 months (case study coming soon.)

Nevertheless a 10% increase in organic traffic per month for this client would result in the following:

  • Month 1 – 18,000 sessions (The first month usually does not result in a traffic increase.)
  • Month 2 – 19,800 sessions = 1,800 increase in traffic x1.11 revenue multiplier = €2,000 increase in sales.
  • Month 3 – 21,780 sessions = 3,780 increase in traffic x1.11 revenue multiplier = €4,200 increase in sales.
  • Month 4 – 23,958 sessions = 5,958 increase in traffic x1.11 revenue multiplier = €6,600 increase in sales.
  • Month 5 – 26,353 sessions = 8,353 increase in traffic x1.11 revenue multiplier = €9,200 increase in sales.
  • Month 6 – 28,989 sessions = 10,989 increase in traffic x1.11 revenue multiplier = €12,200 increase in sales.
  • Month 7 – 31,888 sessions = 13,888 increase in traffic x1.11 revenue multiplier = €15,400 increase in sales.
  • Month 8 – 35,076 sessions = 17,077 increase in traffic x1.11 revenue multiplier = €18,900 increase in sales.
  • Month 9 – 38,584 sessions = 20,500 increase in traffic x1.11 revenue multiplier = €22,800 increase in sales.
  • Month 10 – 42,443 sessions = 24,443 increase in traffic x1.11 revenue multiplier = €27,100 increase in sales.
  • Month 11 – 46,687 sessions = 28,687 increase in traffic x1.11 revenue multiplier = €31,800 increase in sales.
  • Month 12 – 51,356 sessions = 33,356 increase in traffic x1.11 revenue multiplier = €37,000 increase in sales.

*Judging by the competition of the SERPs this 10% growth could continue for about 2-3 years before the client started reaching economies of scale and simply running out of search volume and relevant keywords to target.

The total 12 month campaign cost would be: €3,000 x 12 = €36,000. The total INCREASE in organic traffic from month 2-12 would be: 168,917 sessions at a traffic to revenue multiplier of 1.11 = €187,667, minus the €36,000 cost = €151,667 increase in revenue. – The potential ROI for year one would be over 500%.

*Content costs for this client would be around €1,000 a month, although if you have a content team in house we can use those to reduce costs.

The Real Value

But the real value is after the initial 12 months when previous organic rankings stick (these links aren’t going anywhere remember, this is 100% white hat link building and hence the organic rankings don’t drop either!) So a €37,000 increase in sales would happen each and every month and if the campaign continued into year 2, the traffic would of course increase at the same rate even on the same small 750 prospect campaign.

By the end of year 2 the campaign wouldn’t be twice as effective (€37,000 x 2 = €74,000 per month), instead due to the add-on benefit of previous traffic not decreasing by the end of month 24 the organic traffic would hit approximately: 161,000, with a revenue multiplier of 1.11, the MONTHLY Revenue = €178,000 per month not in fact €74,000. Which is of course a massive difference of close to 1.2 million a year.

Another Added Benefit

This is of course using conservative figures of 10% a month increase in organic traffic. But there’s another element we don’t use in our ROI calculations and that’s the value of DIRECT traffic that results from the links being built. This traffic converts at a slightly lower rate than organic traffic but is still highly profitable. The additional direct traffic benefits are difficult to estimate and we just use this as an additional benefit for the service we offer but don’t include this in ROI calculations.

ROI Calculator Method

If for example you don’t have an Ecommerce store or you find it difficult to track the metrics inside of GA in regards to setting monetary figures up for the business then the ROI calculator method is a broader method we use to analyse the potential ROI for a campaign.

This method is as follows:

1.) Calculate the total search volume for your primary keywords

Again this is tough to estimate and more geared towards local clients or lower volume keywords. In this example let’s assume we have an security client based in London. For all services and locational keywords they have a search volume of 5,000.

2.) Calculate Lifetime value of a client/customer

This should be quite obvious to a well managed company as it ties back into acquisition costs, but in this case let’s say the AVG lifetime value of a customer is £10,000.

3.) Click Through Rate + Market Share

Assuming all keywords can be ranked within a 6 month -2 year period, we work backwards to find the total value of generating #1 spots for these keywords. The click through rate for this particular group of keywords would be around 35%.

4.) Do The Maths

Finally we put everything together and do the ROI maths.

Starting with the search volume of: 5,000 per month.

Divide this by the click through rate: 0.35 x 5000 = 1,750 organic visitors to site per month.

Divide this by your websites lead/conversion rate = 1% = 17.5.

Multiple new client rate by lifetime value = 17.5 x £10,000 = £175,000 per month.

This method is very accurate for local serp results but again a lot less accurate than the Google Analytics based return on investment approach.

If you have any questions feel free to contact me directly on [email protected] or have a look at how we actually build these high converting campaigns and our exact link building process.

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About the Author

Tom Buckland is the founder and director of Ghost Marketing - A link building agency based in the UK.

Ghost Marketing