Calculating the Value of SEO Using Google AdWords

AdWords can be an incredibly valuable keyword research tool, especially now that Google's moved to hide much of your keyword data inside "not provided."

The problem with every other keyword research tool, including Google's own keyword planner, is that they can be really inaccurate.

Fortunately, if you're using Google AdWords, you can get a very accurate picture of search volume for particular keywords.

So let's use one of our clients as a real-life example. I'm not going to share who this client is or what industry they're in, but I will be using real numbers.

Value per click

The true value of a click can vary dramatically by keyword, industry, the state of your website, etc. But if you're already paying for these keywords, why not just start with the amount you're currently paying per click?

Makes sense right? If you're already paying, say, $5 per click for a given keyword, then that click must be worth $5 to you.

So this client is paying an average of $4.68 per click, which is what we'll use as our value of an organic click.

This particular client does one specific thing so there's no need to break out keywords by service or product - they're all pretty close to the same CPC. If you have a wide variety of keyword groups with very different average CPCs, you might want to break those out and figure the value per click by topic.

Search volume

In order to calculate the value of ranking organically, we need to know how many clicks we can expect. In order to determine that we first need to know just how many searches are happening each month on our target keywords. And that's something we can get pretty easily with AdWords. Impressions tells us how many times our ads appeared, which is a pretty good measure of how many searches there were on our target keywords.

Note that our impression share on this campaign is pretty much 100%. If your impression share is less than that, you'll need to compensate accordingly.

Also note that if your business is seasonal, search volume might vary over time and so you may want to use the average impressions per month over an entire year. For this example, we'll use 24,108.

Click through rate

The next thing we need to determine is the click through rate we can expect at various positions for our target keywords. Unfortunately, Google doesn't supply this info, but there have been a few studies as well as some leaked AOL data that give us a place to start.

This chart shows the average click through rate for the top 10 positions in organic search from those various studies and the leaked AOL data.

For the purpose of this example, I'll use the most conservative numbers from Slingshot.

The calculation

So for this client, we end up with the following values for each position:

This suggests the value of a #1 ranking for this client is over $20,000 per month.

Another example

Let's take a look at another client. This is interesting because this client happens to be ranking #1 for every variation on this set of target keywords, so we actually know how much traffic we're getting from a #1 organic position and we can figure out if our calculations are even remotely on the right track.

So we have 7,845 impressions, but notice our search impression share is only 41%, which suggests we're getting less than half of the total available impressions.

But I'm going to make an adjustment here because it's pretty rare that you achieve a 100% impression share in AdWords, even with an effectively unlimited budget. Impression share is calculated based on an estimate of the available impressions based on your bids, budget, etc, and not the actual count of impressions, so that would explain why you'll rarely see 100%.

I've found impression share to be as much as 10% off, and since I like to err on the conservative side, let's adjust impression share by 10% up to 51.02%.

Based on a 51.02% impression share, we can estimate there are about 15,376 impressions each month for our target search terms.

All these numbers add up to the following search volume, click, and SEO value numbers:

This is a really cool example for two reasons:

1. We know how much revenue was driven from the 189 paid clicks shown above (some, not all – I'll explain shortly).
2. This client is ranking #1 pretty much across the board for all variations on this target keyword topic so we can get a pretty good picture of how much traffic we're getting organically by looking at the traffic the ranking page is getting (it's an interior page).

Comparing estimates to real data

The paid revenue

‍We tracked what happened with the 189 clicks for our paid campaign. For a variety of reasons, we were not able to track all of the revenue driven. My estimate is it was only about half, but I'm only going to use what we can verify, which was $1,200, knowing that number is probably very conservative.

So $1200 total revenue and 189 clicks equates to about $6.35 revenue per click. Assuming a 20% profit-margin, we get a profit per click of $1.27 - a conservative number that's still a bit higher than our average CPC.

‍Actual organic traffic

‍During the same time period shown above, our organic search traffic (GA sessions) to the page ranking for these terms was 2,384, which is about 15% less than estimated; definitely within what I would consider an acceptable margin of error for an estimate.

The equation

So to sum up, the equation I've used here for calculating the value of ranking organically for keywords (or topics) you're already paying for on AdWords is:

‍Estimated CTR at target organic position * Search volume * Average CPC

Things to watch out for

So, there are definitely some things to be aware of when applying this formula. Some of which include:

• Are you paying a reasonable CPC on Google or is your CPC so high that your campaigns aren't profitable? Abnormally high CPCs could skew these results so that organic rankings appear more valuable than they might be.
• Are your campaigns very loosely targeted? If you're generating a lot of irrelevant impressions for keywords you probably won't ever rank for, that might cause your search volume calculation to be off by quite a bit.