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April 26, 2005

"How much better is ranking No. 1 versus No. 10? A recent study reveals the truth." by Brent Winters

Recently, I ran across an interesting study by the Atlas Institute that examined how much traffic a Web site could expect to receive based upon which position your page occupied in the top 10 results. If you ever thought that occupying position 4 was about as good as position 1, then think again.

According to the study, you can expect your click-through rate to decline rapidly after position 1. Click-through rate, or CTR, is computed by dividing the number of times a listing or ad was clicked by the number of impressions, or times it was viewed.

A search engine will have a limited number of impressions for any given keyword or phrase. Think of these impressions as a Boston crème pie with each search position occupying a slice of that pie. Unfortunately, if you're last in line at the desert bar, the piece of pie you get will be dramatically smaller the further you are from that first slice.

For example, with Overture, if you receive 100 clicks per day for a number 1 position on "strawberry cheesecake," then according to the study, you could expect to receive about 77 clicks in the number 2 position. A number 3 position drops to about 59 clicks. By the time you reach position 10, you would receive only 7 or 8 clicks. The relative percentages vary between Overture and Google AdWords, but the conclusion remains the same: You can literally double your traffic by simply improving your rankings by a few positions.

So when dealing with paid placement, should you always go for that number 1 slot? Only if maximizing your traffic is of paramount importance, as you'll normally pay a premium for the first few positions. That's why it's important to track the profitability of your campaigns with a service like WebTrends. You must know how much you can afford to pay before you begin to lose money. Otherwise, you can burn through a lot of cash in a hurry.

With organic search, computing ROI (return on investment) is less straightforward, but it's also less risky. Organic listings are free. You have an investment in time getting started, but once you secure that number 1 placement, you could receive the aforementioned 100 clicks per day for free. The challenge in this is knowing how to do it in the least amount of time.

Posted by isoh at April 26, 2005 10:01 PM

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