Click Through Rate And What It Means

The Click through rate, abbreviated to CTR, is the way Google Adwords measures how many clicks you have versus the amount of impressions accrued in your Google Adwords campaign. The below article was written by Adwords guru Tony Roocroft.

Click Through Rate (CTR) & What It Really Means

We glibly talk about Google Adwords click through rate (CTR). We keep asking ourselves what the CTR for a campaign should be. But what does CTR really mean and why does Google see it as representing something like 60% of a keywords total Quality Score.

Let’s try to answer the reason for Google seeing the CTR as being most important. To reach this answer we need to understand how Google makes money from all its advertisers. To make the explanation simple consider a situation where there are 2 advertisers only and the ads from these 2 advertisers are shown 1000 times each and always together.

Advertiser 1 has a CTR of 5% and is bidding R1 per click

Advertiser 2 has a CTR of 10% and is also bidding R1 per click

This means that Google will make 0.05*1000*1.0 = R50 per 1,000 impressions from Advertiser 1

On the other hand Google stands to make up to 0.10*1000*1.0 = R100 per 1,000 impressions from Advertiser 2.

Clearly Google would prefer to show number 2 advertiser’s ads in preference to that of number 1 advertiser.

Therefore the ad of number 2 advertiser will show up higher in the results table. More importantly the way the Google algorithm works is to ensure that in this case advertiser number 2 will never pay more than R0.07 more than the advertiser immediately below.

The implication of this is enormous in terms of cost per click and competitive position.

In summary Google wants to display ads that have high CTR and in return is prepared to reward the advertiser by promoting the ad to a higher position and by charging less.  On the other hand Google is reluctant to show ads with low CTR because those low CTR ads have a negative impact upon the overall profit per 1,000 impressions. This is the main reason your ads don’t always show up when you do a search for your own keyword.

When Google does show the lower performing ads you can be pretty sure this is done only because the better inventory is not available at the time the search was made.

It should be clear now that CTR is very important.

So Why Should We Be Happy with CTRs of 1, 2 or even 5%?

The answer is that we shouldn’t. So the next question to ask ourselves is..

Why are such low CTRs happening.? There are a number of possibilities amongst which are

  1. The ad text does not meet the searcher’s needs
  2. The competitors’ ads are better written
  3. The searcher doesn’t know what the need is anyway… just that there is a casual interest at the moment in time the search is made.

It’s a fact of life based upon my observations that the vast majority of ads do NOT meets customers’ needs. As such they don’t deserve to be clicked at all. The fact that they are clicked at all is probably through CURIOSITY rather than INTENT. Hence the low CTR.

Single word and even double word keywords are often doomed to have a low CTR because they are too broad to be of interest to a dedicated searcher. Dedicated searchers know what they want and express that need not in one or 2 word keyphrases but 3, 4 5 and more word phrases. If you don’t believe me check your server logs.

If you know where to look and then take a close look at your Google reports you will find that such search longer tail queries have dramatically higher CTR’s than the shorter keywords.

It stands to sense therefore that Google will reward you with lower click costs and higher ad positions for these search queries. Even more important your conversions will almost certainly increase.

Master CTR and Conversion Rate… Increase Profits

CTR is a very important variable within any Adwords campaign. However it is only one variable and it cannot be considered by itself since other variables play important roles in determining final profitability.

Optimisation of Google Adwords is about mastering all the variables to ensure a very profitable outcome for any campaign

Do join us for the next Adwords workshop to be held on April 28th and take control of your own online destiny.

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