Keyword research is the first step in any online business project. While searching you will be scanning thousands of keywords at the same time. Since building a website on a specific keyword might be expensive (template, SEO, Advertising, PPC on social media, web designer, etc.) it makes sense to estimate the economic potential of the keywords before setting up everything.
The ROI of a keyword depends on many variables and more specifically on your online business model but there is a formula that is always applicable.
ROI = Visitors * Ranking * CTR * GPC
Now let's see in detail every component:
- Visitors: the number of visitors that come to your website and that have the potential to generate a conversion
- Ranking: the percentage of clicks gained thanks to the position of your website in the Google results page: is it the first one or it ranks in page 2 (or >3)? My personal opinion is that the first 3 positions are worth the effort to invest in, the others are not.
The image below shows the CTR (click through rate) of the top10 Google results.
- CTR: Click Through Rate or Conversion Rate depending on your online business. If you have an Adsense website you will be calculating your Click Through Rate in order to determine how many visitors really click on the ADS bringing you money.
If you own an e-commerce website then you will be calculating your Conversion Rate in order to filter those people who really buy your products from those who are just visiting your website.
Search ≈ 1%-7%
Facebook ≈ 0,06%
Display ≈ 0.05%
- GPC: Gain per Click is strongly depending on your business model. In our presentation released for free to ILP1 subscribers we decided to give just an example.
This number is basically used to give a value to the conversions so if you had an e-commerce site this would be the difference between your price point and your costs (which is exactly your profit per sale)