How Important Is Click-Through-Rate (CTR), Really?

By Sydney Hadden | Small Business

Managing paid search accounts takes a lot time and dedication. It’s certainly not an exact science and every marketer has her own ideas for maintaining success and profitable accounts. There are metrics that are (or should be) used to measure success such as value/conversion and value/cost, but there are countless others that marketers debate the relevancy and importance. Click-Through-Rate (CTR) is one of the metrics which some advertisers swear by, while others discredit.

CTR: The metric used to measure ad performance, calculated by the number of times an ad is clicked (clicks) divided by the number of times the ad was shown (impressions).

If I had an endless amount of time I could do regression model after regression model to test the relevancy of any and all metrics, but as it is, I do have other things to do…not to mention part of being successful is having some personal insight, common knowledge, and a knack to know what works. So, let’s go through some basics on CTR to figure out how important of a metric it is.

Why it’s important:

CTR certainly gives you a broad view of how well your ad attracts visitors. There’s a wide range of acceptable rates given your industry but it’s the most telling when your rates are extraordinarily low, or high.

  • Gives a base of visitors who will potentially convert
  • Impacts QS > which impacts CPC > impacts ROI
  • Helps gauge success relative to competitors and between campaigns
  • Aids in evaluating ad copy, specifically the call to action

Why it’s not important:

  • Doesn’t necessarily mean a conversion
  • Does not tell you the quality of your visitor
  • Can include malicious or bad clicks
  • Impressions are not necessarily acknowledged by users, meaning these values are a bit arbitrary.
  • CTR is based off other variables as well, including position, bid, and competition.

What’s more important?

  • ROI is much more important, not that strong of a correlation between CPC and ROI because too many other variables are in play (competition, volume, type of offering, ad copy, etc.). Here are some other influencers on PPC ROI:
    • Revenue per click
    • Bid management
    • CTR
    • Other (seasonality, marketplace, etc.)
    • Bid management is by far more important than CTR (a high click through rate would not be beneficial if it meant you were paying unprofitable prices for your visitors). Its important to balance, positions, negative keywords, and relevant trends to manage your bids on targeted keywords (for more information on proper keyword research and targeting check out this resource).
    • Other important factors in PPC management:
      • Conversion rate
      • Ad copy (For tips on developing better PPC ads read this)
      • Cost/conversion
      • QS

Does that sound inconclusive? I thought so too. Basically, it does matter, and it doesn’t. Like all strategies it’s important to keep the big picture in mind and not get lost in the details. If your account has extremely high CTR’s but very low conversions or usability metrics, that’s probably a sign that you’re attracting unqualified visitors. If this is the case – work on your ad copy, keywords, and campaign targeting to focus in on more relevant searchers. If you have extremely low CTR’s –your account will certainly see the negative impact of that, low volume, higher relative costs, etc. Work on a strong call to action, and targeting relevant searchers.

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