March 1, 2008: I’ve found that its common for advertisers to overstate the value of having a high Click Through Rate (CTR).
The fact of the matter is, that in and of itself, click through rate is useful is measuring how successful you are at engaging a particular audience with a specific ad message, but beyond that it does not necessarily translate to business results.
Lets First Take a Look at Some of the Benefits of Having a High CTR:
Click Through Rate is one of the most important (if not the most important) factor in Google’s Ad Rank formula. This means that CTR is very important in determining your Quality Score. This in turn affects several things:
- Your Ad Position is determined by your Maximum Cost per Click bid and by Quality Score – exclusively.
- For your ad to be eligible to be shown in the gray scale box that precedes search results, it must reach a certain Quality Score threshold.
- Actual Cost per Click is determined by factoring in your Maximum CPC and your Quality Score.
So a good Quality Score can result in cost savings in your campaign.
But What Defines a “Good” CTR?
- “Good” is relative.
- CTR does not exist in a vacuum.
- Your CTR is compared to that of everyone else competing for the same search terms.
- CTR is compared separately and normalized by position. A CTR that appears adequate out of the 6th position may actually be great compared to the field.
- Search CTR does not affect Content CTR and vice versa.
So essentially, its hard to say when a CTR is good or bad just by looking at the number.
So This Begs the Question – When is it Good to Have a “High” Click Through Rate?
When you are Dealing With a Relatively Low Amount of Impressions.
- A 20% or 30% click through rate might seem difficult to maintain and costly, but when you are only dealing with less than 100 searches per month for a niche market, it’s great. When the available traffic stream is very small you want to own as much of it as possible.
When you are Dealing With a Very Narrow (and Highly Applicable) Target Audience.
- In B2B Paid Search I can not reiterate this enough, it is not about bringing in a large volume of traffic, rather it is about bringing in the highly qualified traffic.
When you are Bidding on your Competitor’s Brands.
- People that are searching for brand names in a particular space are either currently shopping or already a customer. These are qualified and highly relevant searchers, and if they don’t already know about what your firm offers it is about time to introduce yourself.
If you are Running a Placement Campaign on a Cost per Impression Model.
- The merits and pitfalls of CPM modeled placement campaigns are to be discussed elsewhere, but assuming you are paying per thousand impressions you would need to convert a large amount of them to actual traffic to make good business sense.
When you Have an Unlimited Budget for Click Charges.
- In this hypothetical situation, CTR can be used to fast forward the accumulation of data. With more complete information, we can make decisions to the benefit of the campaign.
Finally, and Most Obviously, Whenever is it Profitable for you to do so.
- This is purposely vague. Assuming you convert visitors to measurable business results, then by all means, attract more visitors.
When is it not Necessarily Good to Have a High Click Through Rate?
If your Campaign is Running on the Google Search Network.
- A little known fact about Quality Score calculations: Only your CTR for the Google search page comes into play in determining your Quality Score. CTR on Google search partners does not. The CTR you see in your dashboard and reporting is an aggregate of both (assuming your campaign is opted into search partners).
In a Content Campaign.
- More specifically, you shouldn’t think of Cost per Click as one of the major health factors in the content network as a whole. Look at individual placements on a case by case basis – a certain CTR might seem low, but the ads may be buried in the bottom of the page or the site may have a niche audience that doesn’t fit your product.
When it is Causing your More Important Business Metrics to Suffer.
- “…but click through rate improved” is never a good excuse.
When it is Draining your Marketing Budget or Daily Budget.
- When dealing with slow moving and high impact deals, you are always looking to land the prospective whale. This is impossible if your ads aren’t running.
I think it was Ibsen who said that the enlightened minority would always lead mankind in the right direction. Think of your CTR like this; you don’t want to bring in the masses, rather you only want the best most qualified traffic clicking on your ads.
When your keyword focus is laser sharp, and only then, should you try to capture as much search traffic as possible.