PPC Estimated Traffic, Clicks and Costs

How does Google calculate the estimated traffic and costs when using the keyword tool? How do they derive the minimum and maximum clicks you might get and the prices? Does it use average click thru rates etc in the calc? If so, what are they? thanks
- Mark O. M / London, UK

How does Google calculate the estimated traffic and costs when using the keyword tool?

Google is in excellent position to accurately estimate the traffic on keyword searches since they have 65% of the search market to extrapolate from. This is compared to WordTracker which historically used just a couple of directories that formed about 1% of the search market and extrapolated from there.

Costs are calculated based on competition for a given phrase and the amount of traffic on the phrase. Again, they probably base this on their internal data. The costs are per click, and should be based both on competitions and traffic as well as the current average bid amount for the phrase.

How do they derive the minimum and maximum clicks you might get and the prices?

Based on the price, they can conclude your average position in the sponsored links. Based on their internal data, they can estimate the number of clicks you’ll receive on your advertisement for that keyword. Of course it’s an estimate, your ad might increase your clicks if it is very attractive, which will increase your costs and click through traffic. Alternatively, if you have a lousy advertisement, or low quality score, you might get no clicks. They provide a range to give you an idea based on the knowns they have.

Does it use average click thru rates etc in the calc? If so, what are they? thanks

Definitely, again they are basing their estimates on historical data for people in and outside of your industry. As to what those CTR’s are, it depends on the keyword. I believe they provide you an estimate in the adwords ad builder.