Valuing organic traffic can be tricky, whether you are looking at your own sites or looking to acquire a new one.
There is a tendency to regard organic traffic as ‘free’, in the sense that you are not paying for each visit, and so it’s often overlooked in budgets for digital marketing. In addition, organic traffic is often overstated or overestimated when sellers attempt to determine the value of their website.
In this article, I’ll give you a relatively easy way of assessing the monetary value of organic traffic.
The Basic Formula
In order to calculate the value of organic traffic, we’re going to use the following formula:
Estimated monthly value = Total monthly searches * CTR[Position] * Value per visit
To be clear, the terms we are talking about here are:
- Estimated Monthly Value is the total value created (per month) for a particular keyword.
- Total Monthly Searches is the monthly search volume of a particular keyword.
- CTR[Position] is the estimated click-through rate for a keyword, based on the current or target page rank.
- Value per visit is an estimated value per visit.
This seems pretty straightforward, right?
The only slight issue is that some of these terms can be a little difficult to calculate in themselves. So let’s go through them one at a time.
1. Total Monthly Searches
Calculating the average monthly searches for a keyword is probably the easiest part of this process, and if you are an experienced SEO marketer you likely already know how to do this.
There are two tools that can be used to do this: Google AdWords’ Keyword Planner, and the Ahrefs Keywords Explorer. The Google system is free, but won’t give you so much data. The Ahrefs tool costs $99 / month, but will give you a lot more detail.
Let’s assume you are using Google Adwords. The process is pretty simple: just tell the system which search terms you are interested in. The results will look something like this:
The data we are interested in here is in the “average monthly searches” column. As you can see, Google will only give you a range, rather than a specific number. Ahrefs will provide the actual number.
In any case, make a note of this number, and also the ‘suggested bid’ value, because we will use that in step 3.
Now we will calculate the click-through rate (CTR). A higher rank on Google will translate to a higher CTR, but up until now it was a little difficult to see the exact numbers.
Now, though, Advanced Web Ranking (and other rank trackers) has made a great tool that tracks search rankings versus the click-through rate (CTR). This tool will tell us what percentage of searchers are likely to click on our link, based on the position that the site achieves in the Google rank.
At this point, you’ll notice that the site that is ranked #1 will get a huge amount of the CTR for a particular keyword. In fact, for most keywords the top-ranked site will take 35% of the clicks, and an additional 31% on top of that if you have the featured snippet. (SEO a winner take most game.)
So let’s say that the site you are looking to acquire is #1 for a particular keyword. You know now the monthly search volume (from step 1) and the CTR.
Let’s say that the monthly search volume for your keyword is 14,000, and the CTR for the site’s position is 35%. We can put these into the equation we started with:
Estimated monthly value = 14,000 (Search volume) * 0.35 (CTR[#1]) * Value per visit
We’re getting there… But now comes the difficult part.
3. Value Per Visit
The value per visit is necessary in order to put a dollar value on organic traffic, but it can be tricky to calculate. In recent years, the best eCommerce platforms have started to calculate this figure for you, but in an acquisition you’ll have to calculate it by hand.
There are a couple of ways of doing that, but I’ll show you a simple one:
Take the figure that we saved from Step 1, the ‘suggested bid’. This is what Google thinks traffic is worth for your keyword, and it calculates this based on the money you would have paid to get those visits to your site.
As a result, this method only quantifies how much you would pay for a PPC campaign to get similar traffic to your website. But it does not ascribe any value to the actual revenue that you generate from it.
Still, this method has the advantage that the numbers are easy to obtain, so let’s run with it for now.
Let’s say that the suggested bid value for your keyword is $0.64.
Now we have everything we need to calculate the value of organic traffic for a site.
Putting It All Together
So let’s pull all these numbers together into the formula we started with. The original formula was:
Estimated month value = Total monthly searches * CTR[Position] * Value per visit
And now we know these numbers:
- Total monthly searches = 14,000
- CTR[Position] = 35%
- Value per visit = $0.64
So now do the math:
Estimated monthly value = 14,000 * 0.35 * $0.64
= $3,136 per month
The Bottom Line
Though we’ve done this process for just one keyword, it’s worth working through the math for a few different keywords in order to see which are most valuable, and give you the best ROI.
Once you’ve done that, it is fairly easy to work out if the money you are planning to spend on an acquisition is worth it. By comparing your investment with the value of the organic search traffic we’ve just calculated, you can see how many months it will take for you to make a return on your investment.
These days, many of the most popular companies across the globe are entirely web-based, meaning all of their products and services are offered over the internet. Like real estate in the real world, websites are now thought of as investment opportunities with the potential for their monetary worth to grow substantially over time.
The marketplace for website transactions is constantly growing, with both buyers and sellers looking to get in on the action. No matter what side of the trade you are involved with, you will want to be sure that the website up for sale is a valuable property with strong technology behind it.
In this article, we’ll discuss several software categories that matter most when buying or selling websites. Upgrading to new tools will show a commitment to growth and stability.
1. Cloud Hosting and Storage
Image courtesy of Hello2Hosting.com
Today’s website investor is only interested in properties that are hosted in the cloud. They don’t want to have to worry about setting up and maintaining their own servers or managing a data center. With the cloud, those responsibilities are outsourced to a hosting provider and paid for at monthly rates.
To show your website in its best light, it needs to be optimized for speed and performance. If not, the value of the website can sink due to the fact that visitors are unlikely to spend much time or money when pages don’t load reliably.
Different cloud hosts specialize in different types of websites. If your property is primarily a blogging enterprise, then it makes sense to use a platform like Kinsta, which was specifically designed to manage the WordPress content management system and provides support for migrating WordPress content across hosting solutions.
The bottom line is that, depending on your present hosting arrangement, an upgrade in this area may significantly drive the value of your website up.
2. SEO Optimization Software
Image Courtesy of TemplateTrip.com
Website buyers want assurance that the property they are investing in has a good reputation and looks strong in Google’s eyes. This is what makes search engine optimization (SEO) so critical before and during website sales. Though not cheap, options like a subscription to Ahrefs or SEMRush should be mandatory.
Poor or inattentive SEO will leave the website floundering on the second or third (or worse) page of search rankings, meaning fewer visitors will find it and – all together now – driving down the value. A new website owner may feel forced to spend more on advertising to try to attract users and that expense is coming out of the sale price. Strong SEO metrics does the exact opposite, acting almost like free marketing and making the site a more valuable asset.
In the early days of the internet, improving SEO was as simple as researching good keywords in the content for search engines to index. With the considerably stiffer competition these days, more expertise is required and upgrading to a pricey keyword tool can help reduce the time and increase the effectiveness of the process.
3. Marketing Tools
During negotiations of a website sale, often the most critical factor is the marketing performance and related metrics. Buyers want to see strong return on investment (ROI) and conversion rates, which track how often the content results in a desired action by a customer or visitor – we’re talking about clicks, purchases, or email list signups.
Third party tools like Sumo can help to strengthen marketing efforts and make websites more appealing in transactions. It’s important to show growth, as investors want to have confidence that any website they purchase is on an upward trend rather than flat-lining or dropping.
Website investors want to see modern, proactive strategies in place when it comes to marketing. Active email campaigns (which need their own tools to be done properly – MailChimp and Mailerlite are leading solutions), a strong social media presence, and content that includes video can make a property more valuable as it points to growth rather than decline.
4. Cybersecurity: Firewall, VPN, and Security Suite
Image Courtesy of LehighValleyChamber.org
Cybersecurity is no longer an esoteric topic reserved for high level computer science classes at the local university. The incredible growth rate of hacking attempts and successes has created an environment that forces any website owner to make security a priority or suffer the consequences. The bad news is that there isn’t much demand for a site that’s infected with viruses, malware, or has recently suffered a data breach.
The good news is that you don’t have to be a cybersecurity expert to put into place strategies that incorporate effective security software that make it harder for hackers to compromise the website. The three critical areas to pay attention to are firewalls, a virtual private network (VPN), and an anti-virus/anti-malware security suite. And don’t forget to install new updates as soon as they become available. The following is a quick review in case you’re not familiar with these security software tools.
Firewall: A firewall sets up a sort of perimeter defense that separates trusted from unknown traffic and filters out the latter. Actually, it does a lot more than that but here’s a quick rundown on why you want one.
Virtual Private Network: If the website collects or stores any sort of private data (and most do), recent GDPR regulations related to privacy make choosing a VPN any time you connect to the front or backend almost mandatory. The bottom line is that the encryption and IP address cloaking are an excellent defense against the rash of continuing data breaches.
Security Suite: There are a handful of effective choices in this part of the online security industry, any of which provide solid anti-virus and anti-malware protection. To choose not to use one is virtual website suicide. With the average small business site being probed by hackers 44 times per day, an infection is almost certain if you don’t take this precaution.
5. Customer Service Software
Acquiring new customers is a great way to grow an online business, but unless you keep those users happy, you will not build a valuable property. The goal should always be to retain current customers and find ways to boost their activity on your website. Poor customer service will hurt a company’s reputation. Nobody wants to buy into a bad service experience.
When it comes to online stores and service providers, customers expect fast, accurate answers to any questions or issues they encounter. A tool like Intercom helps to funnel all customer communication into a single stream so that you can manage it from a central location. Intercom offers real-time chat solutions that can be easily integrated with your existing platform.
6. Activity Tracking Tools
When a website if first put up for sale, potential buyers want to see fundamental data about past performance. If key metrics like unique visitors per month are not available, then it is very unlikely that a deal will be done. So before trying to sell any online properties, make sure to have an activity tracking solution in place. The further back it goes, the better.
Third-party tools like Crazy Egg take care of most of the grunt work. You simply add a few lines of code to your website and let it track all of your visitor activity, making it one of the easiest software upgrades on this list. Crazy Egg also leverages machine learning algorithms to automatically make suggestions on how to improve your website performance and retain more users.
The Bottom Line: Essential Software Upgrades
Websites can be great investment opportunities. It’s like a store that’s open for business 24/7/365. But in order to take full advantage of this business strategy, you have to understand what drives the price of a website up or down. As we’ve just discussed, some factors include marketing performance, SEO metrics, and customer service reputation.
Like a house flipper, you want to seek out opportunities to boost a website’s value in a hurry. Upgrading the software behind a website can prove to potential buyers that there are significant growth opportunities. You don’t need to find the next Amazon or Netflix in order to make a nice profit on a website sale; you simply need to identify a property with high potential and strong marketing fundamentals.
There are a number of factors that go into valuing a business. These are widely known – financial trending, margins, traffic, proprietary tech – but in an industry that is barely 35 years old AGE is also big factor. In this case of Art Cove the business has been around for 50-years, first trading as a retailer in Queens before moving online in 1999. In 2015 they shot the store and now trade exclusively online, both direct and via core marketplaces.
In this Seller Interview we speak with Josh Simone from ArtCove. He takes us through the history as well as their marketplace expansion.
1. The business is 50-years-old. How has it changed in that time?
We started off in 1971 as a brick and mortar art supplies store. After some time we added craft supplies to our store. The business took off with the newly added craft supplies. As time went by, big box stores moved in so we shifted to eCommerce starting our website artcove.com in 1999. At first, instant success but then things started getting more competitive.
In 2014 we started selling on eBay. And in 2015 we started selling on Amazon. We did $200,000 in our first full year on Amazon, with little to no effort, we listed just a few products. In 2018 we expanded to Walmart, Etsy and started building a new website with Shopify giving us the ability to sell across Facebook and Google also. These projects are fairly new but show great promise. Like all great business you must change with the time and we have done this many times through 50 years of trade.
2. You’ve expanded to all marketplaces including Amazon, eBay and Etsy. How have these channels impacted the business?
It was easy at first. We started selling on eBay then Amazon, moving high volume product quickly. The problem is margin. These are a lot lower on Amazon. Our recent expansion shows real promise, we’ve expanded to Walmart, Etsy and started to build a new website reducing our dependency on Amazon. I think by expanding to several marketplaces we have set the business up for long term success giving us and any potential acquirer opportunities and genuine diversification.
3. With so much history you must have a loyal customer base. Do you have a good repeat buyer base?
We have a very loyal customer base. We provide outstanding customer service which keeps people coming back. We just recently rolled out a customer project board so we can see what our customers are doing with our supplies. This has really helped to build long term relationships and get to know our customers much better. We do business with Sea World, Sesame Place, The Los Angeles Lakers, The Howard Stern Show and many other large businesses. We do a lot of business with schools and non-profit organizations also.
4. What are people buying and has it changed over the years? Are their clear trends?
We have focused on everyday type products that anyone can use. We stay away from fads or short-term trends. One of our biggest products is Craft Mirrors. These are an everyday type item that always sell well year-round. We have also found that a lot of best sellers are not carried by the big box stores so this insulates the business somewhat. We have several product lines that no one carries. At the same time we are always adding new products to our website. The trends are very clear.
We run ads for our best performing products and respond well to customer feedback…making product decisions accordingly.
5. There’s so much history here. Why are you selling?
This is a three-generational business, so we do this for a lot more than the money at this point. It’s about keep the business going and taking care of our customers. We are looking for someone to take over our tradition. There’s so much history and even more opportunity here.