One of the first important questions to ask yourself before investing in an SEO campaign is, "What's the value
of a first page search engine ranking anyway?" Below I have calculated
the annual value of a 1st page Google organic ranking for 'Health
Insurance' to be $7,471,194. And yes, I'm talking
over 7 million US dollars here, not Kazakhstan Tenge. As strategic
business decision makers, putting a dollar value on what a first page
ranking is worth is crucial to deciding how much time, effort and money
to invest into your SEO campaign. Further, you can compare the value
of multiple keyword phrases and start performing pro-forma ROI analyses
that compare search engine optimization with other forms of marketing,
such as direct mail.
Estimating the value of a 1st page ranking
on any search engine is a straightforward analysis that requires a few
minor assumptions. I consider this analysis straightforward because
Google already gives you most of the information you need within their keyword tool.
When I value a ranking I'm trying to calculate the ranking's fair
market value, or what I would have to pay another comparable source to
get the same amount of targeted traffic to my website.
You may
have had to perform a fair market value "comp analysis" the last time
you purchased a new home. When performing a home comp analysis, you
average the price of other homes recently sold in your area of
comparable square footage, age, location and features. The theory is
that if you can calculate what the market is willing to pay for a given
home, you can determine if the seller's list price is fair or not.
You
can perform this same type of analysis before undertaking a search
engine optimization campaign by analyzing what your competitors are
paying Google AdWords per click to rank for a given keyword phrase.
Similar to the home comp analysis described above, if your SEO campaign
is going to cost more than paying a search engine directly for the
traffic, SEO may not be the optimal solution. Although, this is rarely
the case, and the vast majority of SEO campaigns end up being five to
fifteen times more cost-effective than pay-per-click campaigns. This
is before considering that once top organic rankings are attained, they
often persist into the future with very little ongoing investment
(think compounding ROI). Needless to say though, pay-per-click can be
extremely effective when applied correctly.
One thing that was
drilled into my head in business school when performing financial
analyses is, "Always be conservative." Politics aside, being
conservative with your assumptions when considering marketing
investments will ensure that you and or your boss will always beat the
estimates. This can lead to good things, like raises, promotions, new
cars, and the avoidance of divorce proceedings. Therefore, the first
SEO valuation I'm going to describe to you will be conservative because
it will not consider organic rankings on search engines other than
Google, long-tail derivative search engine rankings, and the perpetual
nature of organic rankings. This analysis will determine the annual
value of a first page position 2 through 4 organic ranking on Google
for 'Health Insurance'. To be conservative I chose to not consider a
position 1 ranking because position 1 rankings can be extremely
difficult to attain.
The first two figures you need to start the
analysis are the Google AdWord's average cost-per-click for 'Health
Insurance' and the global average monthly exact search volume. These
figures are outlined in red in the keyword tool screen shot below.
Please note that I changed the Match Type to Exact so that my valuation
will not take into consideration long-tail derivative rankings.
Technically, when you optimize your website for a specific keyword
phrase, such as "health insurance," you will also attain top rankings
for a number of long tail keyword phrases, like "affordable health
insurance" and "individual health insurance." For the sake of being
conservative, we will not consider these rankings in this valuation.
Now
that we know that the average monthly search volume for "Health
Insurance" is 823,000 and the average cost-per-click is $8.90, the
final figure we need is the average click through rate of a position 2
through 4 organic ranking on Google. The most reliable figure I've
seen for this statistic is within the Enquiro/Marketing Sherpa 2007 Business to Business Survey.
Within this extensive study they found that 52.6% of all search engine
traffic clicks on a top 4 position organic ranking. Further, they
found that 27.1% of searchers click on the first organic listing.
Because we're not considering the first organic position in this
analysis I will take 52.6% minus 27.1% divided by 3 to get an average
position 2 through 4 click-through-rate of 8.5%. I trust this figure
because Slingshot SEO's client base's average click through rate for
those positions is 8.9%, only a few tenths off. Below is the simple
math required to derive the annual value of a first page Google organic
ranking for "Health Insurance."
Step 1:
823,000 Monthly Exact Search Volume for "Health Insurance"
x
8.5% Click-Through-Rate of a Position 2-4 Ranking
69,995 Visitors per month
Step 2:
69,995 Visitors per month
x
12 Months
839,460 Visitors per year
Step 3:
839,460 Visitors per year
x
$8.90 Google AdWords Cost-Per-Click
$7,471,194
Now you may be asking yourself, "I'm trying to optimize for all
search engines, so what's the value of ranking on all US search
engines?" Below is how I would calculate the value of organically
ranking on all search engines. Please note that for simplicity I'm
using Google AdWord's average cost-per-click as the cost-per-click for
all search engines. The only extra figure you need to perform this
analysis is Google's search market share. comScore calculated Google's search market share for June of 2009 to be 65%.
823,000 Monthly Exact Search Volume
/
65% Google Search Market Share
x
8.5% Click-Through-Rate of a Position 2-4 Ranking
x
$8.90 Google AdWords Cost-Per-Click
x
12 Months
$11,494,145
Now
you have a simple technique for estimating the value of an organic
ranking.
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