How Valuable Are Organic Keyword Rankings?

I was speaking to a friend of mine who owns a regional limousine company the other evening and I was telling him how difficult it is for small businesses, in general to “get the value” of search engine optimization. Of course, I’ve helped him extensively with his website, but we often barter services and since I’ve known him for over 10 years now, we’ve both seen a lot of ups and downs in our financial lives, so I don’t really charge him what I would charge for a normal SEO engagement. When I told him the costs of of what many professional SEO’s charge for a traditional engagement, he was rather stunned.

It’s hard for a small business to make the financial investment, or commitment into something like SEO, which may cost thousands of dollars in consulting fees per month and could run the course of 6, 12 or even longer term project time lines. But assuming you have hired a good SEO firm or consultant, here are some real numbers to help understand where the financial value is in having a good organic search presence for critical keyword searches. In order to stay reasonably on theme, I am going to use the idea of a Boston Limousine company.

Factor #1: Keyword Search Volume
The first step in a search strategy is understanding how your customers search and find services online, like the services you provide. The next step is to make educated projections on what terms are the best for your business, based on search volumes and the related subject matter of your website.

Consider a Boston Limousine Company. The immediate keyword research indicates the following search volumes:

  • “boston limo” – approximately 3378 searches/day
  • “limo service boston” – approximately 1146 searches/day
  • “limo boston” – approximately 551 searches/day
  • “boston limo service” – approximately 213 searches/day

For four, relatively similar terms, users search search engines for applicable websites, approximately 5,288 times per day.

Factor #2: Understanding How Search Rankings Effect Impressions and Click Rates
While small business owners obviously understand that people click search results and that website appearing at the top of the page get clicked more than websites 5 pages deep in the results listings, understanding some of the click percentages associated to rankings helps make projections on traffic expectations when considering an SEO strategy.

Considerations:

  • Organic Search Results get approximately 70% of Clicks (source: SearchEngineJournal)
  • Searchers “see” search results as follows (source: Marketing Sherpa):

    • 100% see the first result
    • 60% see the second result
    • 50% see the third result
    • 35% see the tenths result (the last result on the first page of traditional search result pages)

  • Jim Boykin posted a report on the actual click rates for top 10 rankings from AOL users. The results were, at the least, interesting, and helped validate what those of us who measure search rankings to search referrals already had estimated.

    The Click Rate Results for AOL Users:

    • AOL Total Searches:9,038,794
    • Total Clicks: 4,926,623
    • Search Result Rank 1: 2,075,765 (42% of Clicks)
    • Search Result Rank 2: 586,100 (11.9%)
    • Search Result Rank 3: 418,643 (8.9%)
    • Search Result Rank 4: 298,532 (6.1%)
    • Search Result Rank 5: 242,169 (5.0%)
    • Search Result Rank 10: 147,551 (3.0%)

  • Given these numbers, if a Boston limousine company ranked equally in search results for the above mentioned terms, here are approximate numbers they could predict for search traffic.

    • Total Searches Per Day: 3,702
    • Search Result Rank 1: 1,555 Clicks/Day
    • Search Result Rank 2: 441 Clicks/Day
    • Search Result Rank 3: 329 Clicks/Day
    • Search Result Rank 10: 111 Clicks/Day

Factor #3: Revenue per Sale and Rate of Sales/Click
My friend assumes he makes $100/sale when taking a limousine reservation. Let’s assume that 1% of the clicks he receives on his website actually complete a sale and make the reservation with his company. I know it’s a bit higher, but I want to be reasonably conservative in these estimates.

Given comparable numbers, here is the potential revenue generated from Organic Search Results for a Boston Limo company, with keyword rankings in the Top 1, 2, 3 and 10th positions:

  • Formula: Clicks/Day times 1% Rate of Conversion times Revenue/Sale
  • Optimized for #1 Rankings: $1,555/Day or $46,650/Month
  • Optimized for #2 Rankings: $441/Day or $13,230/Month
  • Optimized for #3 Rankings: $329/Day or $9,870/Month
  • Optimized for #10 Rankings: $111/Day or $3,330.Month

Let me restate that one more time. In this scenario, if a Boston Limousine company was in the top position for the four terms above, they could potentially be generating of $46,000 in monthly revenue. $46,000/month from organic search.

Additional Factors and Conclusions
No reputable SEO firm will tell you that you will be #1 for all 4 of those keywords next week, or even next month. It will take time, patience and an effective SEO campaign or campaigns to achieve success, which should be meant for long-term search visibility and website presence. You also need to consider what components of the campaign you will be responsible for, and what components the SEO vendor delivers on. The more competitive the market, the more likely you will need to regularly manage, improve and implement an SEO strategy.

If you consider the end goal however – in this case, a Boston Limousine company website, generating over $46,000/month solely on organic search engine optimization – it starts to make sense why the costs for working with a quality, reputable SEO vendor are going to be an expensive investment. Unfortunately, just like many other major financial decisions we make, it’s a difficult first step when making the commitment.


Comments

One Response to “How Valuable Are Organic Keyword Rankings?”

  1. Sherwood on February 27th, 2007 8:16 am

    Nice breakdown. When we were doing work for IBM, we built them a “lost opportunity matrix” that basically walked through these steps. In that case, the angle we presented to them was this idea that SEO traffic represented business they were losing to competitors. Every SEO dollar they missed was an extra dollar in the competition’s pocket.