Back-of-the-Napkin AdWords Calculations to Drive SEO Keyword Decisions

Here's a quick little trick I want to share with you about reverse engineering organic keyword position worth via AdWords.

Lets assume that you've found that the query [macbook pro bamboo stand] is killing it on AdWords. It's consistently high ROI.

You've split tested ads like crazy, your CTR is high, your quality scores in turn are in great shape, and you're getting all the impression share you can wrestle from your competiton. You've already brainstormed and are running for every variant and expanded on mobile, search partners, accross all the USA, and on an extensive time schedule.

You want more volume but you're already eating up all the inventory on AdWords.

So now it's time to pursue an organic ranking for that query. But how much should you invest to rank for that query? How much is an organic position 1 ranking for [macbook pro bamboo stand] worth?

Well here's the back of a napkin calculation:

As an example, lets assume the following AdWords stats:

[macbook pro bamboo stand] (monthly avg. AdWords Stats)

Impression Share: 50%
Impressions: 10,000
Clicks: 500
CTR: 5%
Avg. Pos: 2
Revenue: $1,500
Gross Profit: $1,000
AdWords Cost: $500.00
Net Profit: $500
ROI: 100%

Now, we know that a position 1 organic ranking on Google gets roughly 30% CTR:

(Lots of studies on this eg. A New Click Through Rate Study For Google Organic Results)

So assuming that the conversion rate on AdWords and organic is similar (remember, back of the napkin, not exact), here's how much profit a stable position 1 for [macbook pro bamboo stand] would bring in:

  • If 50% impression share at 5% CTR brings in $1000 gross profit...
  • Then 100% impression share at 5% CTR brings in $2000 gross profit...
  • And 100% impression share at 30% CTR (Position 1) brings in $2000 x 6 = $12,000 gross profit. (30% is 6x more than 5%)
  • 100% impression share at 15% CTR (Position 2) would bring in $6000/mo gross profit.
  • Position 3 would be $4,000 and so on.

So if you invest $3,000 and it takes you 1 month to get to position 3, you'd recoup your investment in under 2 months total (~1.75 months or 7 weeks).

So actually $3,000 isn't a crazy amount to invest to gain that ranking.

You can combine this research with some keyword difficulty research (lots of tools out there) and find keywords that have both (1) proven to be revenue generating via AdWords and (2) are also relatively less challenging to rank for.

Happy strategizing!