The Value of Ranking #1 in Dollars and Cents

Filed in MY BEST POSTS, SEO by Matt McGee on February 28, 2007 10 Comments

How good is “good enough” for your SEO campaign? Do you pat yourself on the back when you’ve reached the first page on Google or Yahoo!? Do you stop and move on to the next keyword when you’ve cracked the top five?

If the answer is “yes” to any of those questions, you could be leaving a lot of money on the table — a lot of your own money if you’re the business owner, or a lot of your client’s money if you’re the SEO.

How much are you missing out on by settling for “good enough”? Let’s create the XYZ Cosmetics Company and use them as an example.

Let’s pretend XYZ Cosmetics has the No. 5 spot on a Google search for [skin cream]. I have no idea who holds that spot right now and have no relationship with any cosmetics company. I do know, however, that a 100% markup on products is common in this industry. In other words, if you buy a bottle of skin cream for $50 at retail, the store likely paid $25 for it and pockets the other $25 as profit.

To do this right, we’ll need to know how many times searchers type [skin cream] into Google. Short of running an AdWords campaign, there’s no way to get an exact number. Aaron’s keyword tool estimates about 14,000/month on Google for this keyword. Keyword Discovery estimates about 160k for a full year, or about 13,000 per month (and that’s across several engines). The Overture tool says there were about 7,000 in January on that network. For the sake of this unscientific example, let’s be ultra-conservative and go with 5,000 per month. (That’ll help us eliminate automated checking skew, too.)

So, here’s our scenario for XYZ Cosmetics:

Keyword: skin cream
XYZ SERP position: 5th spot
Searches per month: 5,000
Price of item: $50
Profit per unit: $25

Next question is, of those 5,000 searches, how many click XYZ’s listing at No. 5 in the SERPs? We’ll have to estimate again, and last year’s AOL search data release mistake helps here. Some of that data showed the #5 spot in the SERPs getting 4.9% of the clicks on a given query.

AOL Search Data chart - click through rates

It’s AOL, not Google, but let’s run with it. Now we have this:

Keyword: skin cream
XYZ SERP position: 5th spot
Searches per month: 5,000
Price of item: $50
Profit per unit: $25
Clicks per month: 245 (4.9% of 5,000 searches)

What about conversion? Estimates vary by industry, but 2% conversion is often mentioned as an average. We like averages. We’ll use it. Here’s the updated data:

Keyword: skin cream
XYZ SERP position: 5th spot
Searches per month: 5,000
Price of item: $50
Profit per unit: $25
Clicks per month: 245 (4.9% of 5,000 searches)
Conversion: 5 orders per month (2% of 245 clicks)

Result: From the #5 spot, XYZ Cosmetics makes a profit of about $125 per month on this jar of skin cream.

What if they had the #1 spot, instead? Let’s update those last two lines of data:

Clicks per month: 2,100 (42% of 5,000 searches)
Conversion: 42 orders per month (2% of 2,100 clicks)

Result: From the #1 spot, XYZ Cosmetics makes a profit of $1,050 per month on the jar of skin cream.

That’s an improvement of $925/month — more than 800% better by being in the #1 spot compared to the #5 spot. And this is just for one product with a measly $25 profit per unit sold. XYZ Cosmetics probably has 200,000 items for sale, and a $50 price tag could be average. Even if only 0.1% of their inventory fits this “top five” scenario, we’re talking huge profits: Multiply $925/month by 200 products (0.1%) and you have another $185,000 profit per month. That’ll pay for your SEO campaign and a lot more.

So, yeah, top five is great. But what if it only takes another 10 quality links to get even higher? What if it only takes one great viral marketing campaign? Are you sure top five is good enough?

[tags]seo, search marketing, #1 ranking, buckets of cash[/tags]

Comments (10)

Trackback URL | Comments RSS Feed

  1. practical22 says:

    Good good post

  2. pratt says:

    Awesome post Matt. Great motivation to never settle for a rank.

  3. Matt – your timing is incredible. I’m putting together data and a presentation for a meeting I have in which I’m trying to get more funding for SEO/SEM work. I’m going to link to your post as part of my case. Excellent work!

    -Pat

  4. Matt McGee says:

    Thank you, thank you, and thank you guys for the kind words. Pat – glad I could help. If you get the funding, maybe you’ll tip me like 0.1% or something? ;)

Leave a Reply

Your email address will not be published. Required fields are marked *