If you’re an entrepreneur thinking about entering a new market niche, you’re probably also wondering how much it will cost to get people onto your site. If you want to size the market and figure out how much AdWords would cost you might turn to Google AdWords’ Traffic Estimator for metrics.
You’re guaranteed to get the wrong answer.
For several years I helped financial services companies build out their online marketing strategies and the first question a new client would ask me is, “How much traffic will we get and how much will it cost?” I used to use Traffic Estimator to give an answer but I eventually realized how wrong the estimates are.
To demonstrate this point, I’ll pick a set of keywords where I have data from real sites with big budgets and compare their results to what Traffic Estimator projects.
For a set of keywords related to “auto insurance,” here is what Traffic Estimator predicts.
Summary (per month)
Total Estimated Clicks
2370 – 3000
Average Estimated CPC
$6.13 – $7.26
Total Estimated Cost
$28,024 – $47,343
Estimated ad position
For those same keywords in February 2011 (a typical month), here was the true daily result.
Summary (per month)
Now the sceptic in me says, well, maybe the quality of the ad was better than average so the campaign got more clicks. Ignoring the fact that the campaign in question got 7x more clicks than the estimate, let’s look at Estimator’s projection for Impressions, not clicks. There, Google should be spot-on since the ad itself would make no difference.
Traffic Estimator’s estimated Impressions:
I’ve observed these order of magnitude mis-estimates from Traffic Estimator for a wide variety of keywords.
Instead of relying on Traffic Estimator’s predictions, when you need to price and size a new market:
Build a throwaway ad campaign
Set the max bid at something outrageously high in order to be guaranteed the #1 ad spot ($100 bid).
Cap the ad budget at $50
Make the ad copy so horrible that no one will click on it
Google will show your ad for a while before it delists it for being too low quality. By then you should know average daily search volume.
If you have some dollars to waste, write a decent ad and pay for enough click throughs to also get a handle on CPC. As an untrusted advertiser, your initial CPC will have a risk premium baked in so you can safely estimate a long-term steady state CPC that will be 25-50% lower.