How to calculate the potential AdSense income for an exact match keyword domain

I recent read a blog post by Spencer from Niche Pursuits about calculating income from adsense site, which prompted me to complete some work I’d started early this year. I wish I’d done it early it would have save a number of failed sites from having been built in the 1st place!

When evaluating whether to build a Niche site around a keyword phrase one suggestion is to simply use the following “rule”

Local Exact Match Searches per month in Google(LEMS) >10,000

CPC > $1

So a potential income of LEMS * CPC = 10,000 * $1 = $10,000 per month

However this calculation is flawed in a number of ways, it doesn’t take into account the following factors:

Firstly the CTR (click through rate) changes for each Serps position (Serps CTR) spencer has suggested a figure of 20% if you believe you can achieve somewhere in the top 5 positions guide of the amount of traffic available (42% if your confident of 1^st place). S0 rather than 10,000 searches we need to calculate the Clicks were likely to see through to our page which is 20% or 2,000 clicks per month

We also must take into account, that not everybody that clicks on you serps listing will then click on your AdSense Ad ‘s, so there is another CTR (AdSense CTR) to content with. Typically I achieve around 10% so I use that figure

So our clicks on ads becomes 10% of 2000 or 200 per month a small fraction of the original “exact match searches”

Secondly the CPC value is an estimate, in reality the actual CPC (cost per click,) paid by the advertisers will vary and also as an AdSense publisher we receive only 68% of the amount paid to Google (AdSense factor).

So now we arrive at

= ((LEMS * Serps CTR)*AdSense CTR) * (CPC *AdSense factor)

= ((10,000 * 20%) * 10% ) * ($1 * 0.68)

= 200 * 0.68

= $136

The new calculation now yields a more realistic potential income from the keyword and one that more fully reflects the reality of CTR and CPC for a given keyword.

By building this formula into a spread sheet it is then a very quick process to evaluate the potential income of the main keyword of a niche site.

However, most niche websites have a lot of traffic coming to the site through additional long tail keywords. In order to evaluate the potential income of these keywords, we can simply repeat the process above, varying just the LEMS and Serps CTR.

To do this by researching the main and long tail keywords using Google Adwords tool and extract the data to a spread sheet and apply the formula against each keyword.

Now were able to rapidly evaluate the maximum potential revenue for this niche. Care must be taken though as the formula only applies when you are confident of reaching a top 5 serps for each keyword phrase you enter.