Keyword Value Estimation

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Estimating how much a keyword might earn for you if you created a niche site around it can be tricky. You have to work with a set of assumptions and guesses and then plug those numbers in with actual numbers provided by Google. First of all, you need to assume your niche site is going to make it to the first page of Google’s search results. If you can’t make this assumption, then you shouldn’t be building the site at all! Next, you need to guess where on the first page your site might land. Being up at #1 yields a ton more clicks thru than if you are down towards the bottom. The last assumption or guess that you need to determine is the click thru rate, or conversion rate for whatever your monetization method is. Google tells us the number for average monthly searches on particular keywords, and also the average cost per click that advertisers pay for that keyword.

Guessing Your Visitors per Month

Click thru rates for sites on the first page of Google seems to be an ever-changing phenomenon. The latest study I could find indicates that the top 3 spots in Google get 18.20%, 10.05% and 7.22% respectively. Spots 4 thru 10 range from 4.81% all the way down to 1.04%. You could take the average of the top 10 and come up with an assumption of about 5%. I prefer to be more optimistic though and assume I can get my page up towards the top. I use 10% as an assumption for a page that I think I can get to the first page of Google. For example, if a keyword gets 1,000 average searches per month, then I will assume my site built around that keyword will get about 100 visitors per month from that keyword. It’s a pretty safe bet that the traffic coming to your site won’t be solely from that keyword, so we’ll add 50% from that figure to account for long-tail search terms or other traffic to your site. Our new estimate, for this example, would be 150 visitors per month.

Click-Thru, Conversion and Dollar Amount

If you are monetizing with a cost-per-click (CPC) method such as Adsense, you need to try to guess what your click-thru-rate (CTR) will be. Google makes it very clear in their Adsense terms of service that they do not want us to discuss our CTR’s. Doing so would be one of many ways to get yourself banned from Google Adsense. Since I am still new to this, I’m going by estimations that I’ve learned from a few pro’s who have had years of experience with Adsense. They say that you should estimate about a 5% CTR. If I am expecting 150 visitors per month, this means I should expect to get around 7.5 clicks per month.

If you are monetizing with another method, such as affiliate or product sales, do your best to figure out your conversion rate as a percentage. If you can’t find actual numbers, 5% seems to be about the going rate for most stuff that I’ve seen. Whatever your percentage is, plug this number into the formula (meaning multiply it by your visitors per month).

Lastly, we need to plug our dollar amount into the equation. If you are using Adsense as your monetization method, you can find the average CPC that advertisers pay for your keyword in the free Google Adwords keyword research tool. Keep in mind though that this is not the average amount that you will receive per click. Google takes their cut (I think 60%) before you get paid. Since this entire calculation is a rough estimate, and to keep things simple, we simply use 50% of the number that is provided in the Adwords tool. If the CPC is $2.00, we multiply half of that ($1) by the number of clicks per month (7.5) to find that this hypothetical keyword should earn us about $7.50 per month.

If you are using a more straight-forward monetization method like affiliate or product sales, you should know exactly the amount you will earn per sale. Multiply this number by your number of conversions per month to figure out your estimated monthly earnings.

Adsense Keyword Calculation Formula

Broken down, I will show you exactly how the equation works using a real example. Using the Adwords keyword tool, I do an exact match search for the keyword sumatra coffee. Here are the results:

Punching my numbers into the equation using the assumptions explained above, I come up with this:

  • Global Exact Match searches times 10% ~ 1600 x 10% = 160 (1600*.1)
  • Add 50% for other traffic ~ 160 + 50% = 240 (160 + (160*.5))
  • Multiply by 5% for CTR or conversion rate ~ 240 x 5% = 12 (240*.05)
  • Multiply by half of CPC number ~ 12 x $0.44 = $5.28 (12*(.88*.5))

Using this formula, I might guess that a site built around the keyword sumatra coffee might earn me $5.28 per month if I could get it to the first page of Google. Being very optimistic, like I am, I like to also assume that I will get to number one in Google. Using even more optimistic assumptions, I like to think that I can get 50% of search engine traffic to visit my site if I am at number one. By plugging 50% into the equation instead of 10%, this site could yield more like $26.40 per month!

I’ve taken both equations and put them into a spreadsheet. This makes it easier for me to keep track of keywords that I want to go after, matching domain names and possible earnings. Below is a screenshot of that spreadsheet, excluding (of course) the first two columns that contain my keywords and domains.

The rows that are shaded in gray are domains that I already own. The rest are keywords and/or domains that are on my list and up for consideration in the future. If you want to build a spreadsheet similar to mine using this equation for potential Adsense earnings, I want to help you out. Here are the equations I used:

  • Column E ~ =(((C5*.1)+((C5*.1)*.5))*.05)*(D5*.5)
  • Column F ~ =(((C5*.5)+((C5*.5)*.5))*.05)*(D5*.5)

Example equations here are taken from row 5 of my spreadsheet (thus the C5 and D5 cellsin the equation). This spreadsheet is done in Google Drive (previously Google Docs). If you are using Microsoft Excel I believe you need to put the word SUM right after the = at the beginning of the equation. It should look something like; =sum(((C5….. Keep in mind, if you are copying this equation, you may need to change the letters and numbers for your cells depending on how you have your rows and columns set up.

I hope this post was helpful. In my next post, I don’t know what I am going to write about. Perhaps an update on how my niche sites are going. Eventually, I will start doing income reports as well. Since there is finally a little bit of income to speak of, I might as well share it so everybody knows that I am not just BS-ing here!

Until then, remember that there are several dumb ways to create passive income online, but only one site that is blogging about it! Dumb Passive Income… dot com.

-Matt