TAM analysis for SEO and Growth

Calculating the total addressable market for your product shows you the total opportunity in front of you and opens the door to funding and planning.

When investors look at the TAM, the total addressable market, they gauge the opportunity a business faces. It’s usually expressed in Dollars, but we can use the same concept to size our total opportunity and get funding for our projects in Growth and SEO.

With over 5b daily searches on Google, keyword search volume is a treasure trove of data for TAM analyses. Let me explain how to use it right and come up with useful market projections.

TAM analysis for SEO

The total market is the full potential a company could reach if there were no competitors. In SEO, that would be the full search volume of all relevant keywords. The only question is whether to express that opportunity in months or a year because search volume is usually measured in searches per month. But a site can only fill one or two spots at the top and cover a fraction of the total search volume. That fraction is the total addressable market.

One often-overlooked point is the global aspect of TAM and SEO. A site can rank in many languages but we often think about the core market only. The addressable market is larger but for startups and young businesses, it’s unrealistic to expand globally or into several categories right away. That’s why we speak of the SAM, the serviceable available market, which describes the market share that’s realistic to capture with the current means.

When UBER started in 2009, it quickly gained market share across the US. It was the first player and gained market share from the taxi and public transportation market. Lyft started a full 3 years later, in 2012, and began to grow its market share in 2015.

Source: https://www.vox.com/2018/12/12/18134882/lyft-uber-ride-car-market-share

In late 2014, UBER broke into a new category, food delivery, with UBER Eats. It started gaining market share in mid 2017 and growing with the market.

Source: https://www.theatlantic.com/ideas/archive/2019/08/all-food-will-be-delivered/595222/

That market exploded in 2020 when the Covid pandemic broke out. UBER Eats was able to expand its market share to 23% at the cost of Postmates, which dropped to 3% (source: https://secondmeasure.com/datapoints/food-delivery-services-grubhub-uber-eats-doordash-postmates/). Doordash came out as market winner with 57% in 2021, leaving Grubhub at 16%. Compare these changes with the chart above, and you feel how competitive the market is.

We can observe two TAM dynamics: first, how a company (UBER) established a new market, started facing more competition (Lyft), and then expanded into another market with established competitors. Second, the TAM grew in both markets as more consumers segments got introduced and convinced of ride-hailing and food delivery (see search volume for “food delivery” from Ahrefs below).

We can take the search volume for all our keywords and apply a click curve to define the TAM in SEO. I suggest expressing TAM as an annual amount of traffic you can capture, so you have to multiply search volume with the click curve for position one and by 12 (for 12 months, unless you have the actual search volume per month).

There are a few caveats, though.

First, click curves vary by SERP Features. In the screenshot below, you see a comparison of click curves when a featured snippet, people also asked, or no SERP features are present in mobile search results. They vary widely!

Source: https://www.advancedwebranking.com/ctrstudy/

Second, click curves are different on mobile vs. desktop.

Third, these differences are difficult to factor in at scale. In my approach to solving fragmented user intent, I show a way to aggregate SERP features by keyword. I think the profound way to go about this is to build your own click-curve for different SERP feature variations, similar to how AWR does it with their public data.

Mind you search volume is a flawed metric and might not cover actual search demand for all the keywords that are important for you. That’s why you need to manage expectations when communicating the total addressable market for SEO.

It’s also important to show how the market is growing over time. One way to do this is to use the Keywords Everywhere browser plugin because it provides search volume since 2004. You might not need to go so far back; even the last five years are very useful. Just make sure you have enough data to put noise through Covid into perspective.

This will allow you to answer questions like which market segments (topics) grow, which ones decline, and which ones are flat. In the best case, you want to go after growing segments.

TAM in Growth

In Growth, we can use data beyond SEO to gauge the total opportunity for a product: paid search and social, surveys, or even smoke screens. The latter are landing pages for products that don’t exist yet. You can use paid channels to bring traffic to them and add a “get notified when we launch” button to see how many users are interested.

Top-down vs. bottom-up

Using SEO data for a TAM analysis is a bottom-up approach because it represents a number of people who you know are in the market for your solution. It’s a more robust method. The top-down approach starts with a large chunk of the population in a market, which you then narrow down based on known parameters like demographics, psychographics, or consumer behavior.

Let’s pretend you sell skateboards in the US and know that your target demographic is between 12 and 18 years old. You know that roughly 73M Americans are under 18 years old, and 6M of them are regular skaters. Now, suppose you can find out how many of them come from households with a certain income and the average pocket money size. In that case, you can get to a number of skaters with a certain consumption power and derive a number of potential customers. That’s top-down TAM analysis.

In my opinion, both methods are insightful and lead to a good understanding of the market. We often speak about “understanding the user” and “personas” in SEO and Growth, but spending time to “get the market” helps you understand who you’re targeting and how ample the opportunity is.