The Click Through Rate Falacy

Many advertisers focus a lot of attention on Click Through Rate.  What does CTR mean to an advertiser & what is a ‘good’ or ‘bad’ Click Through Rate?

From a Pay Per Click perspective, a low CTR can be a great thing.  As an advertiser you are stretching your budget further & since you are only paying for the outcome of a click, a low CTR can be the best possible value that you as an advertiser could ask for.  You are enjoying free brand exposure that you are not paying for.

CTR is, however, a good indication of (a) how accurately your ad was placed and (b) the quality of your creative.

By Ad Placement I am referring to both the sites that your ad appears on as well as the actual position of the advertising channel displaying your fold.  Your ad placement is affected by both the accuracy of keywords you select and their relevance to you product, as well as the publishers positioning of your ads.

The quality of your creative is a big determining factor as to whether or not your ad will be clicked.  Is there a clear message & a call to action within your ad.  Good Creative = Higher CTR. On search advertising, a good CTR would be 2%, whilst on a content network such as Google AdSense or Ad Dynamo, a good CTR would be 0.02%.

A low CTR could, however, demonstrate that your creative is effectively pre-qualifying traffic by discouraging users that do not fit your product offering from clicking.

For example, you may be targeting home sellers in the upper end of a market.  Intead of an ad prompting ‘Sell your home’ it may pre-qualify your traffic with a clearer message such as ‘Is your home worth more than $200,000?  We will sell it’.  Even though both ads would probably target similar sites & similar keywords, the more effective ad will actually have a lower CTR since it’s offering is much clearer & only attracts the appropriate customer.

Of course, low CTR is not desirable by publishers who earn on a Per Click basis.  This introduces an interesting challenge of maintaining a level of performance acceptable to two customers who we bring together in a marketplace, but both have totally different objectives.  The answer?  I see CPC & CPM priced advertising merging over the next year in terms of cost.  CPM will lower & CPC will rise.  Advertisers will pay a higher price for a click, but still receive great value since it is outcome linked.

Sean Riley