Calculation of costs for traffic acquisition channels

Very often all entrepreneurs have a question: “Is it profitable to start a business in a particular niche? How much money do I need to start a business (make a website and at least minimally set up sales)? Is there any point or will I just be crushed by competitors?” We will try to give you answers to all these questions in this article.

First, we need to analyze how popular the topic is and whether the market is growing. What does market growth mean? This means that the demand for your product should increase every month (adjustment for seasonality is possible). In order to be able to enter a niche and not go broke, you need to take a place in the market before it becomes hype and the market reaches its maximum.

If you enter after the market has passed its peak, then there is a high probability that you will get burned. Let’s remember, for example, spinners. They were sold for 200-300 hryvnia, now no one needs them even for 30. Those who managed to enter the niche and hit the peak of market growth made money.

Market demand analysis

So, let’s move on to market analytics. We have several services and applications that will help you analyze demand.

Service:

• GoogleAds;
• Google Trends.

Programs:

• Serpstat;
• Ahrefs.

You need to start by collecting semantics. There are several ways to collect it. Let’s start with the simplest and longest – manual collection.

For example, let’s take the niche of 10 iPhones.

It is advisable to accept commercial requests. Informational ones can also be indicative, but due to advertising analytics they will need to be removed. When collecting semantics, always remember that people can search for the same product under different names. For example:

• iPhone 10;
• iPhone x;
• iPhone ten;
• iPhone 10;
• iPhone X;
• iPhone ten;
• iPhone X;
• etc.

All these requests need to be thought through and worked out. We collect the received requests into a separate Microsoft Excel file.

Collecting keywords using Serpstat or Ahrefs

These programs automate routine work with services, such as scraping hints, etc.

The Serpstat program is a tool with many functions and the largest database of keywords for the Ukrainian segment. With its help, you can significantly expand the semantic core of the site, select high-quality phrases and analyze the semantics of competitors. Therefore, it is a good assistant for every SEO specialist. How to use it to select keywords, we have article, in which everything is described in detail.

Ahrefs is a fairly popular keyword research service and one of the easiest to visually understand. Among its main analytics parameters is the complexity of the key, on the basis of which it can be assumed how best to use it. Thanks to this platform, your research can be flexible – you can understand where exactly the desired keyword phrase ranks. How to collect and analyze keywords using this service, we also have a separate article.

After the programs have finished working and collected the necessary keys, if necessary, you can go through them, since the programs will most likely collect those keys that do not suit you. They should be removed immediately.

Next, you need to collect seasonality and frequency data for keys in the region. After this is done, they need to be uploaded to an Excel file. After downloading the file, you can proceed to its design and analytics. Let’s decorate all the column headings beautifully and start working with the numbers.

Seasonality table analytics

First, let’s calculate the sum of frequencies for all queries. Let’s do this under the data columns using the SUM operator. This data will show how interested customers were in this niche. You can build a graph based on them to understand the trend. Select the cells with the amounts under the data and build a graph. According to the graph, we will see that the peak of requests for iPhone 10 has already passed, but growth is now looming. We will understand later what this is connected with.

So, to understand how much demand has increased this year compared to last year, we sum up the value for the 12 months of the previous period and for the 12 months of the current period. Then we calculate the difference between them to understand how positive the dynamics are and whether there is growth or decline. You can highlight a positive difference in green, and a negative difference in red.

It is also very important for us to understand how much demand has increased. Therefore, we will find the ratio of the sums of frequencies for the second year in relation to the first. This will give us an understanding of the scale of growth. But also keep in mind that the request may be new and it did not have a frequency 2 years ago (equal to 0), and you cannot divide by zero. Therefore, it is necessary to take this into account in the formula.

After you have calculated the coefficient, queries showing a huge growth coefficient are highlighted in the table. These are new requests. They led to the second leap. Now we need to highlight these queries and understand which of them gave rise to a new trend.

Here the new trend should be assessed according to two criteria:

• The first is that if the frequency for the first period is 0, and for the second period is greater than 0, then this is a new request that has appeared and may mean that this is a completely new trend.
• The second is if the request growth is greater than the average growth of all requests.

If at least one of the conditions is met, we display this request. And you can conduct separate analytics on them. By unloading seasonality, we gained an understanding of which queries are currently trending upward.

Analysis via Google Ads

The second tool that will allow you to analyze the seasonality and trend of queries is Google Ads. Recently, Google has also started providing data on query frequencies over the past year when collecting keys.

In order to collect keys for Google, you must have an Ads account with running advertising, otherwise the data will not be collected correctly. Log in to your account and select search for new key queries. Even at the stage of key selection by the service, you can view graphs for queries. So, we upload the file and go through the queries we need.

After we have gone through the semantics of unloading, we can evaluate several parameters.

1. Competition of requests. This figure shows how many ads are configured and launched for this request.
2. Approximate cost per click in contextual advertising. It is useless for calculating the cost of the context, but it can be taken as an approximate cost.
3. Monthly frequencies for the last year.

Since we only have frequency over the last year, it is very difficult to perform deeper analytics. However, some data can be obtained from this table.

We calculate the amount of requests monthly. And we build a graph based on them to understand the general appearance of the trend. Next, we make calculations showing how positive or negative the dynamics of requests are.

1. The difference between the first and last month will show whether there is a decline in the trend.
2. The ratio of the second half of the year to the first will show which requests are growing or falling and whether there is growth dynamics.
3. The Growing MIN column shows the growth dynamics over the last 2 months compared to the minimum demand for the entire year.
4. The Growing MIDDLE column shows how the growth trend has been over the past 2 months compared to the average demand for the entire year.

If the coefficient in the column increases on average by more than 1, then such a request can be considered as growing.

So, we analyzed the niche with another tool.

Google Trends

There remains the last one, the most inaccurate and unreliable, but requiring attention – Google Trends.

We enter the request iPhone x and look at the trend line. At the moment, the trend of the request is below 60 units and falls further. Below is a list of similar phrases that you can open and check. For example, iPhone xs.

The data from the table can be downloaded and formatted correctly and this graph can be built in Excel. After we downloaded and analyzed requests using 3 services, we realized that the trend of iPhones 10 and others in Ukraine is gradually being lost.

Download Excel file (.xlsx)

Calculation of costs for traffic acquisition channels

Advertising Cost Analysis

Since we have already collected the semantics, we can analyze the estimated budgets and the approximate return on advertising at this stage. This will give an understanding of approximately how much money needs to be invested in the context in order to get this or that result.

Contextual advertising is a type of advertising in which you pay for each click to the advertising service’s website. That is, the money in the account has run out – the transfers have ended.

Depending on the location of advertising, it can be divided into several types: search and display. But its basic essence is the same.

Google Ads Advertising Forecast

Open the Google Ads page and the functionality for calculating predictive data for contextual advertising.

After adding the keys, it becomes possible to vary the click price and at the same time receive forecasts for conversions and the total budget. If necessary, you can download all queries and view them separately.

That is, based on this forecast, the average cost per click is 3.07 UAH. If we take into account the cost of a click and website conversion, the cost of the application is 307 UAH.

Settings contextual advertising Google starts from 18,000 UAH. and depending on the amount of work and advertising sources (Search/Display Network/Remarketing/Gmail) will increase.

SEO promotion

If you are going to work with this niche for a long time and expand the list of products/services, then attracting search traffic should certainly be present as one of the channels for attracting customers. If your site is new, then SEO will not produce results right away. It takes at least a few months. This is due to the “distrust” of search engines in the site. Google is not a loud filter – a sandbox. If your site is old and has not been subject to sanctions, then if it works properly, the first results will appear after 1-2 months of work, perhaps even earlier.

So, the minimum cost Turnkey SEO promotion with a programmer, copywriter, links, etc. – can range from 30,000 to 50,000 UAH. and more per month depending on the volume of work, the status of the company, and the promotion of the SEO studio brand.

That is, you need to be mentally prepared for the fact that you need to invest in the first months of SEO work without getting any return. Search engine optimization is like a huge and heavy locomotive that takes a long time to accelerate, but is very difficult to stop. And even after turning off the engine, it continues to roll for a very long time. But then all expenses are fully compensated by profits from sales, even after the SEO work stops. With proper promotion (white), the results of the promotion will last for more than 1 month.

So, on average, you need about 40,000 UAH for SEO and with the expectation that it will begin to fully pay off in 3-4 months. That is, if the average cost for SEO until the payback period is 3-4 months, then about 120,000 – 160,000 thousand UAH are needed for SEO. If the site is small, costs can be reduced.

Competitor analysis

Another detail that you need to think about before opening a business is competitor analysis.

You need to understand whether you can withstand market competition with them, whether you have the advantages to sway the buyer’s choice to your side. After all, just a lot of advertising and a lot of search traffic by themselves will not generate sales. You must be better than your competitors. Your disadvantages should be less than the disadvantages of your competitors, and vice versa, your advantages should be more significant than those of your competitors.

For example, a competitor has free delivery, but you offer a discount card for 200 UAH, which will completely cover the free delivery, etc. Each of your shortcomings compared to your competitors must be covered by some significant plus (advantage). Or you must have a well-promoted brand that inspires confidence in your store.

So, collect all the criteria in your niche that your client might look at when choosing a partner. Enter them into the table, each on a new line, and from the top, take from 3 to 10 top competitors and write down according to these parameters everything that the competitor offers.

After that, select all the benefits and apply to yourself. Or do you provide it? If not, note this and think of a benefit that overcomes this objection. For example, for a niche selling iPhone, let’s select selection criteria:

• Originality.
• Delivery speed.
• Delivery cost.
• Official guarantee.
• Price.
• Exchange/return.
• Trade-in.
• Availability of installments.
• Post-warranty service.
• Product insurance.

We fill out the table using our data and the competitor’s data, perform analytics on the best offers and identify disagreements. Think about how you can close the difference between what they offer and what you offer.

Download Excel file (.xlsx). We would also suggest using a similar table or list for chips on the site.

For example:

• A competitor has promotional items when purchasing this product.
• There are timers for discounts for quick purchases.
• There are promotions for the purchase of this product.
• There are reviews.
• There are social networks, etc.

Cost calculation

So, having all the digital data, we can calculate the cost of launching your project on the Internet (now we do not mean launching your business as a whole, because we cannot say how much money is needed to purchase goods, prepare documents, etc.). This means launching a campaign on the Internet.

Setting up Google contextual advertising – minimum from 18,000 UAH/one-time.

Google advertising – from 15,000 UAH per month.

Google advertising budget from 20,000 (it is advisable to calculate it based on the number of expected leads).

SEO website promotion – from 18,000 UAH per month.

But we would like to clarify once again that these prices are not final and, depending on the agencies and the quality of work, can sometimes change tens of times, both up and down.

To summarize

We have calculated the minimum amount of money you need to launch and maintain the constant growth of your online business. But when analyzing a business niche and starting a business, there are subjective and objective arguments.

Objective arguments are financial issues – something that can be calculated and expressed in numbers. Essentially everything that is indicated in our table, plus the costs of opening the business itself: personnel, purchases, premises, cost of opening a company, etc.

Subjective arguments include comparison with competitors and your potential advantages, inner instinct (the so-called entrepreneurial spirit) – something that cannot be calculated financially.

Only after correctly and logically weighing all subjective and objective arguments, make decisions on opening a business.

Serhii Ivanchenko

CEO

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