How to Calculate Your Total Addressable Market (TAM) for SEO

When launching a new product/company or pitching for additional fundingthe forecast against your TAM (total addressable market) is a key component.

The TAM is a key part of a user acquisition strategy and your SEO campaign alike.

It can help you prioritize optimization activities and forecast potential traffic based on your default keyword sets.

Your total addressable market differs from your total market, as your total market is your maximum potential opportunity if there is no competition or alternative products with different USPs (Unique Selling Proposition).

Your TAM is a fraction of this market, but is more closely related to your people and potential users whose needs are most closely aligned with your product/service.

What is the total addressable market (TAM) formula?

The defined formula for calculating your TAM (in a general business sense) is:

Potential Market x Competitive Position = TAM

Your potential market is the number of potential users, for example, the number of email users in the world is estimated to be around 4.03 billion, but if your competitive position is to serve only US users, your TAM is of approximately 250 million.

Your TAM can also be influenced by users using adjacent products.

For example, suppose you are an online service that focuses on user privacy as a core USP.

In that case, users of other privacy-focused products, such as Bravo (browser) and Duck Duck to win can drop into your overall SIZE.

However, when we look at our SEO TAM, we can use existing tools and data to create estimates of our total TAM, and then break it down based on potential user needs (matching your personas).

Establishing your TAM

Establishing your SEO TAM, for me, is a three-step process:

  • Fully identify and identify the USP of the product and capabilities (current and planned).
  • Thorough keyword research around your product/service/offer.
  • traffic estimates (Click curves and opportunity gap analysis).

For the first step, you can achieve this by meeting with the product owners and managers and asking them about the product details, functionality, features, and product roadmap.

This information can be used to inform your keyword research for create better contentbut also a more valid user experience.

It allows the user to forecast their experience with the product more accurately, reducing both churn and redundancy in funneling unqualified leads.

From experience, these meetings can also help identify some potential angles and messages that can be included in the content that competitors miss.

The second step is to make extensive keyword research and categorization. In addition to categorizing by intent, this is also a good opportunity to categorize by funnel stage.

The third step is to create traffic estimates – and you can do this from your keyword research, your target website’s current ranking positions (if any), and whether the SERPs (search engine results pages) for the keywords contain SERP features.

To show this process, I’ll use the Narmi company as an example (using publicly available data through SEO tools).

Narmi’s website currently ranks for approximately 800 keywords in the US and based on Estimated SERP CTR data terms are producing about 500 sessions a month.

If the domain was ranked in position one for all 800 search terms, the total potential organic traffic is around 81,000.

Now this is taking the raw dataset. To get a more realistic TAM estimate, you’ll also need to:

  • Add additional search terms that you currently don’t rank for, but want to.
  • Remove irrelevant search terms from the dataset, for example, random brands that you ranked 81st for and were chosen because you mentioned them once in a blog post.

Ranking for position 1 for all potential search terms is unrealistic.

But with your data, you can create a tiered approach to show what improvements could be made if things were 10% better, 20% better, and so on.

TAM potential in phases from Narmi.comScreenshot taken by the author, June 2022

From this, you can demonstrate to other potential stakeholders and investors what improvement is required to reach specific organic traffic goals, and then link effort values ​​to required resources.

Using your TAM

In addition to traffic forecasting, your TAM data can be further used to forecast leads and transactions.

Prospect Forecast

For most SaaS and leading generation model companies, pipeline is the most important metric most C-level executives and other stakeholders are targeting.

This can be calculated in a similar way to the potential traffic opportunity and can be modeled using existing lead data.

Using Narmi’s estimates, and assuming they currently get 11 SQLs (sales-qualified leads) each month, we can model that it takes an average of 38 sessions for each SQL.

Based on that conversion rate, the potential opportunity for leads on the keyword set is estimated to be 2,116 per month.

Again, this is modeled 100% on ranking for the first position, but just like with traffic estimates, we can model this based on incremental performance gain:

Lead forecast, based on existing conversion rate and incremental performance gainsScreenshot taken by the author, June 2022

This can be further amplified if the number of forecasted leads is multiplied by the value of leads and used to forecast longer term based on dropout rates Y LTV (lifetime value).

This can also identify if there are any retention issues.

If the pipeline shows enough numbers for free trial registration, but then not enough conversions to paid users, then the focus can be on product or customer service/SDRs (sales development representatives) and uncover potential issues with content on the site and product messages.

Transaction Forecast

If you’re an eCommerce store, you can do a similar forecast for the number of transactions you can achieve and total revenue (based on your current or forecasted AOV).

If your data fluctuates a lot depending on the season or due to the nature of the products you sell, you can break it down by product category, or even seasonal category, and combine the forecasts.

Once again, you can compare your total organic transaction and revenue potential data to incremental earnings:

total organic transactions and revenue potential dataScreenshot taken by the author, June 2022

For example, is the current user journey and conversion rate of the site sufficient to generate the leads/transactions needed to drive ROI and growth?

Forecasting existing transactions or leads can help identify both opportunities and problems that might otherwise not come to light until they are missed or experienced.

More resources:

Featured Image: as-artmedia/Shutterstock

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