The Cost of Not Ranking Organically

by on April 23, 2010

For one company it was potentially $2.3 million for just 7 words

I have had a number of people ask me to explain this worksheet since I presented it recently at a local conference.  I developed a more advanced version of this worksheet a number of years ago for a company to help them justify to management they should spend money on SEO.  This is a variation of the Missed Opportunity Matrix I introduced over 10 years ago at an SES event.

The focus of this exercise was to highlight that the company was paying for a segment of traffic they could/should be getting from SEO if they were only ranking better.  Ranking better in this case was to have a listing in the Top 10 positions.  Yes, I know that you really want to be in the Top 5 but we had to start simple with this company so work with me here.  Yes, I know there is an argument that one should even care about ranking but when we did this exercise it still very much mattered.

Here is the chart I developed [key is at the bottom of the article]

Initial Findings:

For the 7 words that were deemed “critical” to the client:

  • They had first page rankings for only 1 of the 7 terms.
  • In 5/7 cases they had received ZERO organic traffic for these words
  • In all cases they were getting less than a fraction of 1% of the opportunity
  • For the 1 term in the 4th position, there was no description due to flash content

The Hypothesis of the Worksheet

You may need to jump down to the key to understand some of the columns of data I used for the calculations but essentially we showed that if they could get on the first page of Google and capture 5% of the search volume of traffic then that would be that much less traffic they would have to pay for.  Currently, to capture 5% of the opportunity at their current average cost per click would require a paid search budget of slightly over $2.3 million dollars per year to generate the same level of traffic they should be getting without paying for the click.  Sample Cost of Not Ranking Template

cost_of_not_ranking

The Cost of Not Ranking would cost them $2.3 million per year

We can argue how much traffic they should be getting and from where.  However, the fact is they are category leaders in many of these categories yet they have no organic exposure.  If we can agree that somewhere between 60% to 90% of all searchers click on the organic listings over the paid listings then we can agree that they were missing out on a lot of traffic that they would now have to acquire by the click.  At the CPC listed in the worksheet that is a lot of money to get traffic they deemed “critical” to their company.

The Outcome

The management team saw this matrix and was stunned.  First, they did not really understand the search opportunity in terms of how many people were looking for the types of products they offered.  They them had a better appreciation of the opportunity of search – that is the purpose of the Missed Opportunity Matrix”

Second, they came to the realization that they “only click on organic listings” and therefore their peers and prospects would only do the same.  They then mandated that this problem be resolved for the top 10 keywords that were listed as mission critical as a test.

We started an aggressive optimization program that resulted in significant increases in traffic.  While the program did steal budget from the paid search program it did drive a significant increase in traffic.  In a later review meeting the now more savvy executives wanted to know about the correlation of paid and organic which resulted in a number of worksheets that showed how they should be effectively integrated to maximize success.

Note: That listing that had a #4 position but little traffic, once identified and the snippet created started getting over 35% of the total estimated click volume.  That single change allowed us to show immediate results in the program resulting in significant budgets being applied to SEO activities.

Key

Keywords – these were the sampling words that they wanted to perform better for but could not convince management to make the effort to make the investment.

Estimated Searches Per month – this comes from the Google Keyword suggestion tool.  Since the paid search words were on broad match we used the broad match volume here which will skew the data for organic but we opted to go with it for dramatic effect.

Current Traffic (Organic) – represents many visits they had come to their site for that keyword phrases based on their web analytics tool.

Share Of Clicks – As a percentage of the total opportunity [Estimated Searchers /Current Traffic] we could show what share they were getting of the opportunity.

Current Rank Google – This was added to show “cause/effect” of not ranking.

Top 10 Click Opp – This is the estimated share of clicks we could get if we were in the top 10.  Yes, this should be higher but we needed the simplest demonstratable point possible – for these words there are the top 10 organic and also 10 paid search terms.  This means there are 20 options for a searcher to take.  There is a 1 in 20 chance of being clicked.  A 1/20 ratio is 5% so it is relatively defendable to the client.  There is a more sophisticated version were we incorporate click probabilities based on position but that was introduced later.

Organic Traffic – this is the number of visits we should be getting “if” we had a top 10 position – or 5% of the total search volume for that phrase.

Missed Opp – this is the delta between what they are getting and what they could get if they were ranking and could capture a 5% share of the volume.

CPC – this is the average CPC they were paying for these terms in the paid search campaign.  You can take the estimated CPC from the Google Keyword Suggestion tool but since they were buying those words already we used their exact average CPC.

Incremental Traffic Cost – This is what it cost them to “buy” that 5% share of traffic they could be getting with organic search.  Yes, there is cannibalization of the organic traffic with paid but that typically happens when they rank higher.  Also, with paid they were averaging about a 1% click rate on their paid search since it was poorly executed.  Even if they had 100% cannibalization they would still have to pay for the 4% opportunity difference.

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Eduard Blacquière May 5, 2010 at 10:06 pm

Thanks for sharing this, Bill, nice case.

I’ve been using a similar model for some time now and it really helps convincing to invest in SEO.

Of course the more reliable data points you have, the more accurate the calculation gets. And the SEO costs need to be calculated in as well, but I trust you did this :)

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