How To Calculate The Profit Value of Inbound Links

October 9th, 2008 • By:  • Business, Link Building

Guest post by RSS Ray:

Learn how to calculate the profit value of getting high natural search engine rankings using inbound links is to your business.

If you have spent any amount of time learning about search engine marketing or looking for a search engine marketing service, chances are you have heard over and over again how much “traffic” your website will receive from high search engine rankings or how many more “hits” you will get from having numerous inbound links. However, if you are like most business owners you couldn’t care less about traffic figures; all you care about is one simple question:
“How profitable are high search engine rankings?”
After all, without the promise of significant profit what’s the point of investing your precious time and money into acquiring high quality inbound links so that you can get high search engine rankings?
If you want to know exactly how profitable getting high search engine rankings is, read on. I’m going to show you how you can calculate how much profit you will make with a high search engine ranking in under 10 minutes, without having to spend a cent.
Before we get started, here are a few terms that you should be familiar with:
Inbound Links: Inbound links are the most important factor search engines use to rank websites. Google, Yahoo, and Microsoft have all stated that getting numerous high quality, relevant incoming links is the most effective strategy for getting high search engine rankings.
Here is what Google’s own website says about incoming links:
“Google interprets a link from page A to page B as a vote, by page A, for page B. But, Google looks at considerably more than the sheer volume of votes, or links a page receives; for example, it also analyzes the page that casts the vote. Votes cast by pages that are themselves ‘important’ weigh more heavily and help to make other pages ‘important.’”
Essentially, getting a lot of high quality inbound links is how you get high search engine rankings. There are other steps that will contribute to your success but for the purpose of this article we will say that inbound links = high natural search engine rankings.
High Natural Search Engine Rankings: High natural search engine rankings are unpaid front page placements of your website for search terms on Google and other popular search engines. To see an example of a website with high natural search engine rankings, type any word into Google. The first page of website results have all beaten out thousands and thousands of other websites to end up on page one.
As a reward for these high rankings, between 68% and 90% of all search engine users will look at only these websites ranked on the first page. But there is even more to the story. Thanks to a mishap at AOL back in 2006, we know exactly which of these highly ranked pages are viewed most often. Take a look at these interesting statistics from AOL.
Ranking on Page
Number of Clicks
Percentage of Clicks
 
Difference from Rank #1
 
1
2,075,765
42.13%
 
 
 
2
586,100
11.90%
 
3.5x less
 
3
418,643
8.50%
 
4.9x less
 
4
298,532
6.06%
 
6.9x less
 
5
242,169
4.92%
 
8.5x less
 
6
199,541
4.05%
 
10.4x less
 
7
168,080
3.41%
 
12.3x less
 
8
148,489
3.01%
 
14.0x less
 
9
140,356
2.85%
 
14.8x less
 
10
147,551
2.99%
 
14.1x less
 
 
Notice how many more clicks the number one position gets compared to even the next highest position. This means competing to get high natural search engine rankings is important for two reasons. First you will likely never be seen if you are not on the first page, and second, even if you are on the first page you will need to fight extra hard for first position which is immensely more profitable than any other position on the page.
Conversion Rates: Conversion rates are perhaps the most exciting of the concepts in this article because this is where money starts changing hands. Your conversion rates are calculated by determining what percentage of the visitors to your website took the action you wanted them to (most likely buying your products).
For example, consider a merchant named Jack who is selling magical beans online. If Jack gets five sales for every one hundred visitors to his website, then that means he has a conversion rate of 5%. Now considering that he sells a pack of beans for $100 (he can’t accept cows as payment online), he can look at his conversion rate to find out that when he reaches his goal of 1,000 visitors a month, he can expect to make revenues of $5,000 (1000 x .05 x $100). Not bad!
To start calculating your own conversion rates, traffic patterns, and a lot more, sign up for Google Analytics and place the code it provides you in your website. It’s completely free and more then worth its weight in gold for anyone looking to sell online. Google analytics will let you know exactly how many people visit your website, where they come from, what pages they look at, if they buy anything, and a whole lot more.
Putting It All Together
Now that Jack knows how much revenue he can make off just 1,000 visitors a month, he starts to wonder what would happen if he could get 2,000 visitors a month, or maybe even 10,000. He knows that the best way to get high natural search engine rankings is via to build high quality incoming links. Unfortunately, he is quite a busy guy and building those incoming links can be time consuming, expensive, or even both. That’s when he decides to figure out exactly how much he can expect to profit from getting more visitors.
To start, Jack uses the Google Keyword Tool to find out exactly how many people are searching for magical beans. He finds that for his main keyword “magical beans” an average of 1,000,000 people performed that exact search every month.
Remembering what he learned from the leaked AOL data, Jack takes those one million searches and multiplies them by the percentage of clicks for each position on the front page. This allows him to see how many clicks his website will get in each position.
Rank
# of Clicks
1
421,300
2
119,000
3
85,000
4
60,600
5
49,200
6
40,500
7
34,100
8
30,100
9
28,500
10
29,900
 
This was quite exciting news as it meant that the top ranked website was getting an average of 421,300 visitors each and every month without paying a dime! For Jack, with his 5% conversion rate, this would mean 21,065 (421,300 x .05) additional sales every month with revenues of $2,106,500 (21,065 x $100)!
Finally, since Jack wanted to know what his profit was, not just his revenues, he looked at his costs for buying the beans, his overhead, and the cost for link building, He determined that he made $50 for every $100 package of beans sold. That meant that his total profits for a top ranking in Google for the term “magical beans” would equal $1,053,250 in profits each month!
Needless to say, Jack lived happily ever after.
Just to recap:
To find out how profitable getting high natural search engine rankings with inbound links is, take the following steps:
1.      Use Google Analytics to find conversion rates, traffic data and more.
2.      Calculate your conversion rates by determining how many sales you make per 100 visitors to your website.
3.      Find how many people are using the search term you wish to target using the Google Keyword Tool.
4.      Determine how many clicks each search engine ranking will get by multiplying the number you got in step 3 by the “percentage of clicks” in the AOL chart above.
5.      To find the number of sales you will generate, multiply your conversion rate by the click data you found in step 4.
6.      Calculate your revenues by multiplying your sales by the price of your product or service.
7.      Your profits are your revenues minus your expenses. Figure out all of your expenses for making and marketing your product or service and subtract them from your revenues.
8.      Keep in mind we were only calculating this data for one search term. Repeat this process and add together your profit figures for each search term you use.

RSS Ray is the host of the radio program Online Marketing with Ray, carried live each week on wsRadio.com. He specializes in helping small and mid-size retail and service businesses increase profits, grow revenue and improve lifetime customer value through internet marketing.  Get Ray’s monthly internet marketing tip sheet and free internet marketing podcasts.  Visit Ray online at RssRay.com.

[tags] high search engine rankings, link building, inbound lnks, Google analytics, RSSRay [/tags] 

 

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This entry was posted on Thursday, October 9th, 2008 at 2:58 am and is filed under Business, Link Building. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

3 Responses to “How To Calculate The Profit Value of Inbound Links”

  1. Pole Barn Resources Says:

    Those are some juicy numbers :)

    One thing I have found in certain niche sites is that if the title and meta description tags are poor you can achieve better click through’s by sculpting an attractive snippet (while working to be #1 of course!)

  2. Danny Cooper Says:

    I’d be interested to find out how paid/sponsored results factor into this..

  3. Roger Hamilton Says:

    Hey, thanks for the information. I’m still a little unsure of this and your post has allowed me to understand more on it! Thanks again!

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