The demand for a keyword is a rather unique economic occurrence.   For search engine marketers, the demand for a keyword is not really based on the number of searches per month or year alone.  The demand for a keyword is based on several factors and often, marketers find it difficult to assess the utility or overall value of a keyword based on data that is available.  Search engines have extended algorithms that help them compute the bid price of a keyword for a particular website or entity that wishes to pay to show up in search results.  However, various reasons for obtaining the optimal keyword (and position) in paid search engine results exist.  Campaign managers pick the wrong keywords because they confuse the demand for a keyword - with the likelihood for the keyword to convert.  The likelihood for a keyword to convert is based on website usability, product offerings, services, prices, website appearance, and competition etc.  The demand for a keyword may be based on weighted variables such as: 

• search volume
• price (from major search engines)
• synonymetrics, (alternative keywords - language parameters – (versions of the same word)
• time (current“ness” of topic – word – parameter, modifying word)
• value (brand, exposure, reach, web credibility)
• competitors in vertical (number of possible results)
• likelihood to convert (history of conversions, account history)
• estimated price  (click, or conversion can be sold for, average sale price per click)

Our short list omits many other good factors but for each individual website, there are various reasons why individual right hand side variables may have different quasi-functionality for the consumer of keywords – the firm.  The true price of a keyword is very hard to define and value is even harder.  It is important to ask … “How much is it worth to you?”

For example:

Auto Transport Company C1:

Generates per lead sale, 4 dollars for each lead resulting from a click:

Auto Transport Company C2

Generates per lead sale, 5 dollars for each lead resulting from a click:

How much should each click cost them?

It all depends.  Various reasons related to firm size, firm reach, product or service quality, and sale price per click may factor into how much each company “is willing to pay”.