How are Keyword Research Values Calculated?

SEO Value is calculated by taking the total traffic that you could expect to receive for a #1 ranked site in Google ("SEO Traffic"), and multiplying this traffic figure by Adwords Cost Per Click as a measure of the value of that traffic.

"SEO Traffic" x "Adwords CPC" = "SEO Value"

This figure represents BOTH the value of the traffic at market-value (i.e. what someone is prepared to pay for visitors), and the cost of the traffic.

It's important to explain an assumption in this calculation:  For the purposes of calculating market value, we assumed that the value of a visitor is roughly equal to what someone is willing to pay for that visitor.

We assumed that if advertisers are willing (or able) to pay [say] $2.50 per click, that they're making $2.50 (or more) per click...

This is because no advertiser wants to go bankrupt - and if they're paying more per click than what a visitor is making them (on average), they will go bankrupt eventually (or at least it won't be feasible for them to continue using Adwords).

So it's reasonable to assume that if someone is able to afford to pay [say] $2.50 to get a single visitor to their web-site, that they're making an average of $2.50 per visitor in profit from that visitor.

If businesses in the market were making significantly more than $2.50 profit per visitor (on average), competition would eventually push the costs of traffic up to a point where businesses were no longer able to compete and bid more money to buy traffic.

So the Adwords CPC value gives us an indication of what businesses are MAKING in this market - not just what they're able and willing to pay.

Because of this, we can assume that the Adwords Cost per Click figure is also an indication of the profit margins some businesses are making for products in this market.

Finally, we've used Cost per Click as an indication of the Value of the click because this measurement consistent with how other assets, (like real estate, stocks and commodities,) are valued; the value of the asset - in this case, the traffic - is the same as the maximum price that someone is willing to pay for that asset in the current market.

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