Understanding Click-Through Rate (CTR) & Common Pitfalls
Click-Through Rate (CTR) is a simple metric that shows that rate at which an ad impression receives a click. It’s a core measurement in Search Engine Marketing and yet, slightly misunderstood on the surface. Let’s look at this major ad performance metric.
What is Click-Through Rate?
Whenever and however you generate traffic to your app or website — be it through any channel (social, organic, referral, paid, display, email) — your links, banners, or ads will have impressions (views) and clicks. Impressions are the number of times a link or ad was seen, or rather available on the screen to be seen. Clicks are, well, people who clicked the link or ad. Click-Through Rate is the percentage of people who saw the impression and clicked it.
A little fictional case study to better understand CTR
To better understand CTR, let’s look at an example of a ‘Search Network’ campaign in Google Adwords. Since I live in wine country, we’ll be using my, fictional, Milani Winery. First, a little context on how Google Adwords works.
In general, ‘search network’ campaigns through Adwords charge on a cost-per-click (aka. pay-per-click) model. Essentially, you’re showing ads at the top of Google search results pages for targeted keyword searches. You determine how to show your impressions based on factors like geotarget, keyword selection and keyword match type. The larger the geotarget and the broader the keyword, the larger the pool and likely the lower the Click-Through Rate. The tighter the geotarget and more specific the keyword (think niche), the more targeted and smaller the pool and thus a likely higher CTR.
Branding campaigns usually generate a lot of impressions to a wide audience, so expect a lower CTR. A Call-to-Action campaign will be more targeted and you’ll want to hit a higher CTR.
Adwords & CTR: Winery Example
(while I am related to the Sebastiani’s and Mondavi’s, my winery is fictional…for now)
Milani Winery, runs an Adwords campaign to drive visits to their tasting room in Northern California. They run three ad groups in a campaign targeting California. The first ad group is titled “wine,” and the keywords are ‘broad’ matched to the term “wine”. The second ad group is titled “winery,” and targets keywords using broad match modifiers, phrases, and exact match keywords. Finally, the third ad group in this campaign is titled “tasting room,” and keywords are phrase match and exact match only. Which do you think will have the highest Click-Through Rate?
Keywords for Ad Group 1: “Wine”
Keywords for Ad Group 2: “Winery”
Keywords for Ad Group 3: “Tasting Room”
[tasting room near me]
[near me tasting room]
+best +tasting +room
+tasting +room +visit
+tasting +room location
Ad group 1: “Wine” is just too broad and would generate the lowest Click-Through Rate (probably around a 0.1%-0.7%). It would return results for things like “Red Red Wine” or “How to remove wine stains” — both of which aren’t relevant. Google would likely decrease your Quality Score, because of the broadness of the term, and your ads probably would show much of the time.
Ad Group 2: “Winery” is getting closer. Winery is a good search term for increasing traffic to a tasting room, but it’s not a bulls-eye match to your target audience. Your CTR is likely to be higher here, but not that much more significant. I’d probably estimate a Click-Through Rate of around 1%-2.5%. Advertising for this keyword could be seen more as a brand awareness campaign.
Ad group 3: “Tasting Room” is just about right! People searching for tasting rooms are likely going to see your ad and find it relevant, especially if your ad is enticing or delivering an offer. At this level of targeting expect to see upwards of 5-6% and up to maybe 8% in CTR. The volume might be smaller but the relevancy and quality is high!
Anything higher than 10% and you are targeted your audience at level of CTR that is usually found when targeting your brand keyword terms, like “Milani Winery.” Great Merlot btw!
* Note, CTR can vary quite a bit depending on bid, landing page quality, and ad copy. So, my estimates above assume you have great quality in those three categories.
The Click-Through Rate Deception
We’ve now seen an example of CTR in action — targeting broad and delivering low CTR, versus tactical targeting generating high CTR. Now we need to talk about when the number can lie and why it’s important pair CTR with a quality metric.
I was once handed an account to optimize that had been running for over a year. The previous company had been delivering a very low Cost-Per-Click and a high Click-Through Rate. Sounds great on the surface, but as I dove into the data I found that they had delivered 98% of the previous years’ clicks and budget on a single broad match term that was included in their brand. The keyword was also synonymous with the name of a county. To top it off, they were not even measuring the quality of visits. Over that previous year, they likely blew $60,000 on irrelevant CTR — even though they had great “ad performance” numbers. Don’t always believe great ad performance metrics without measuring quality, or viewing actual search terms.
A performance without quality metrics is the really the pitfall of Adwords in general. You must have some quality metrics in there that you are tracking. Google Analytics by default will import Bounce Rate, Ave. Session Duration, Pages Per Session, and % of New Sessions. You should also import your goals from GA to best optimize your keyword CTA’s. If for some reason, you can’t access Google Analytics and quality metrics, then you can still get an idea of the quality by looking at the actual search term data report on the keyword tab of Adwords. That will at least tell you if you are hitting a close target.
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