How to Estimate your Revenue from SEO

6 years ago by
A friend recently asked me if SEO is really worth the time. My response: “depends.” But there is a pretty easy way to determine if SEO is worth your time. First, go to Google’s Keyword Tool.  There, start playing around with some of the words and phrases you might want to optimize for. If you’re an online toy store, you might look at the traffic for “toy train kits.” If you’re a B2B SaaS provider that sells risk compliance software, you might try “risk awareness solutions.” Did you see how much global (or local) monthly traffic that term gets? The key to this part of the process is to choose a keyword phrase that is neither too competitive (ie “basketball”) nor too esoteric (ie “purple tween basketball shoelaces”). Ok, so now you have a phrase. You know the monthly searches. Next, you need to know how much traffic that’s going to deliver to your site. There is a lot of controversy about how much traffic each organic search position returns to a site, but I’ll use the Chitika Insights numbers as a heuristic:
  • Position 1: 34%
  • Position 2: 17%
  • Position 3: 11 %
When making estimates, I prefer to err on the side of being more conservative, so I estimate SEO revenue using the assumption that I can get up to the #3 spot in short order. Sure, sometimes this is easier said than done. It’s also very doable to get to the #1 position. A way to guess at how high you’re going to go: look at your PageRank. If you’ve got a ranking of 6 or more, #1 is very doable. Is your PageRank of less than 3? Position 3 or 4 is probably as high as you’ll get until you boost your ranking. Alright, now for something you should already know off the top of your head: What is your site conversion rate? This is easier for e-commerce sites, since it’s the checkout volume/traffic volume. For B2B form conversion sites, it’s the (traffic volume) x (percentage of conversions) x (percentage of sales from conversions). If you don’t know the answer to this question, go throw a fit to your VP of Marketing. The last thing you’ll need to know is: What is your margin on your average sale? Sometimes this can be sort of hard to know, especially when estimating the total cost of goods sold. Still, you should know this. Now you have everything you need to determine…

The ROI of SEO

Now you know:
  • Global monthly traffic for your search term
  • The click through rate of a #1 - #3 position on organic search
  • The percentage of site visitors who purchase
  • You margin on a sale (or margin on a shopping cart checkout)
So, the ROI of SEO is:

(Monthly traffic) x (The CTR from organic search) x (purchase rate) x (revenue from ave. purchase)

To demonstrate how this works in practice, I’ll pretend I run an online jewelry store. The search term I might want to optimize for is “Silver Celtic Jewelry.” From the Google keyword tool, I see that this phrase gets about 1,600 monthly searches.  So, here are my assumptions:
  • I’ll bring my organic result for this term up to #3 in 2 months
  • 5% of my site visitors will purchase
  • My average margin on a shopping cart checkout is $65
Now it’s plug and play, baby!
(Monthly traffic) x (The CTR from organic search) x (purchase rate) x (revenue from ave. purchase)  = (1,600) x (.11) x (.05) x ($65) = $572 /month
Based on the above, it should be worth at least $572 per month to optimize for this term. But actually, it gets better. If you optimize for “Silver Celtic Jewelry” you should get ancillary SEO Juice for:
  • Celtic Silver Jewelry  – 1,600 monthly searches
  • Silver Celtic Rings – 4,400 monthly searches
  • Sterling Silver Celtic Jewelry  – 390 monthly searches
That $572 could balloon if you start ranking in the top three for any of the above searches. If you’re interested in becoming more proficient at SEO, check out The Art of SEO: Mastering Search Engine Optimization.
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