The Catch-22 With Click-Through Rate
I’m not here to disparage our friend, CTR (Click-Through Rate). It’s definitely a useful metric for marketers to gauge how their ads are performing. My purpose here is to provide insight on how (dare I say) over-rated this metric is when compared to other, more vital metrics. CTR is Google’s friend but not necessarily yours. Let’s take a look at how Google interprets CTR:
A high CTR is a good indication that users find your ads helpful and relevant. CTR also contributes to your keyword’s Quality Score which can affect your costs and ad position. You can use CTR to gauge which ads and keywords are successful for you and which need to be improved. The more your keywords and ads relate to each other and to your business, the more likely a user is to click on your ad after searching on your keyword phrase.
The key word here is Quality Score. We know that CTR is a large factor in determining Quality Score. With a poor quality score you will be forced to spend more per click to achieve the same ad rank. If I’m a premium online retailer selling a $300 cashmere sweater and display my price in my ad, I will probably have a poor CTR. Most users will probably see the price and decide not to click. Was this a good thing for the online retailer? I say absolutely–YES! You found a quick and easy way to weed out price sensitive shoppers and save your budget. On the other hand, because of less clicks, your CTR will be affected thus reducing your quality score and ad rank.
Here’s the catch-22: Do I want non-relevant users clicking on my ad or should my ad rank and bids suffer due to lower quality scores?
High CTRs are great, but only if the users that are clicking on your ad are also converting (buying, downloading, singing up, etc). High CTR doesn’t mean much if users aren’t converting, if anything, you’re losing money. Below is a quote by RocketClicks co-founder Glenn Livingston:
“Google has everybody focused on CTR and conversion. But CTR + conversion individually don’t give you the right information to make your critical split testing decision. You might be surprised to note that Google isn’t really pricing their traffic according to CTR, even though that’s how you pay for it. All they have to sell you is space (impressions), so they’re doing the math behind the scenes to figure out how much money they make per impression.”
Glenn Livingston emphasized that profit per impression is considered one of the most important metrics, not CTR or conversion rate, but which ad put the most money in your pocket each time it was displayed. Every single impression has an opportunity to convert.
As a paid search nerd, it’s important to look at all possible metrics and KPI’s (Key Performance Indicator), but let’s not get too focused on CTR. CTR is useful, but definitely can be over-rated compared to CPA (Cost per Acquisition), ROI (Return on Investment) and PPI (Profit per Impression). Happy data hunting!