Saturday, September 20, 2008

Using Google Adwords to Size Your Potential Market

Google Adwords (and similar tools) can provide incredible insight into the potential market you are not reaching. Why? Because it allows you to get access to a page 1 listing on Google and also contextual advertising on a whole range of directories and content sites without spending up big. Why is that important - well it allows you to size your total potential search market - after all everyone sees page 1. You can then use this data to get some key insights into how you can attract more visitors through organic search (ie not paying).

Let's demonstrate the principle by looking at some more real data.

This data was collected over a recent full month of Adwords advertising. I've rounded the results and also averaged them to express all traffic measures as visits per day - this makes it easy to compare to other statistics about visitors per day. The numbers are also quite low as we do very specific targetting of our market. I have three separate grouping of advertising words let's call them pregnancy (PR), gynaecology (GYN) and obstetrics (OB). By multiplying out the visits per day by the CTR you can see that on average I'm getting about 10 visitors per day through Adwords.

Calculating visitors per day

So using these stats indicates that if you optimised for all the words in my groups you could have about 1550 visitors per day! This is of course not going to happen as not everyone is going to click thru.

What click thru rate to apply

Applying the click thru rates (CTR) from my advertising campaigns shows you could get about 10 visitors per day (just multiplying out the stats). Doesn't sound great does it? Well, more visitors will visit you if you are listed on the search results compared to advertising (although I'm saying nothing about the quality of your customers). Remember the stats I showed about click thru on page 1?

Basically you can expect 3-42% of traffic to visit your site depending on your position on page 1. Applying these statistics to my data you'd get 47-650 visitors per month from search. The higher your listing in the rankings the more visitors you'd get.

How would this increase traffic?

These stats show you can increase your visitors by 4-65 times (from my 10 per day stats) through search optimisation. What value do you put on this traffic? That will depend on how your visitors convert into paying customers.

How much money is this saving you on advertising?

If the average cost per click is $1 then this is saving you between $4 and $65 per day. (Not that you're likely to see the same volume of traffic per day through Adwords as it has lower click thru rates).


You can use the same approach with your own campaigns. The approach in summary is:

1. Possible Visitors per day =
Average Adwords visitors per day x Click thru rate for page 1
eg (500 + 500 + 550) x 3% for lower bound and (500 + 500 + 550) *42% for upper bound giving a range of = 47 to 650 clicks per day

2. Value of Page 1 listing =
= Possible Visitors per day * Average cost per click
= 47 * $1 for lower bound and 650 * $1 for upper bound

Final Notes:

You may find while your visitors increase your conversion rate drops through native search engine ranking as you may attract a lot more information seekers rather than potential customers.

Don't forget that Adwords reach is actually wider than Google Search so you won't be able to completely kick the Adwords habit.

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  1. Hi. Can you suggest other ways to size the potential market that don't involve spending money?

  2. As a matter of fact I can.

    Have a look at these two links from SEOBook that look at conducting market research and basic steps to get online - ie what you need to do before you are in a position to promote your site:

    They have some really worthwhile content.