Click Thru Rate, a common metric associated with AdWords, calculates how many times an ad was clicked on, versus how many times the ad was shown. While click thru rate can be helpful in certain aspects of ad creation and account management, overall the metric doesn’t hold much importance. For one, the information it can give an advertiser is limited to ad relevancy and features of the ad itself. I hear many advertisers ask the same question a lot about “What is considered a good CTR” Besides that question being an impossible one to answer, it may also indicate an advertiser isn’t collecting the right data or is preoccupied with the wrong data and will have a hard time in the long run being successful. To me a better question and one that I’ve always wondered is what is a good conversion rate within my industry or amongst my competition. I know what my conversion rate is but without something to compare it with, it too falls short of providing any useful data. However focusing on bringing that metric up to it’s highest level is where most of my effort goes in any AdWords campaign. One thing that is certain about that metric is, the higher the better. This is not true of Click Thru Rate though. I could have a higher than average click thru rate, but if none of those clicks are converting than that “high” click-thru rate is actually costing me money. To me a high performing campaign is one that maintains the highest conversion rate at the lowest possible cost. CTR has almost nothing to do with that. Though CTR may provide me with some indications where my ad is lacking relevancy and I’m not getting the most clicks possible – I could still be maintaining a high conversion rate and low cost per conversion. I often wonder why so many people are concerned with this metric and what they are using that data for exactly.
Unreliability in the Metric
After understanding how a high CTR can actually hurt an advertiser, one should note the unreliability of this metric to provide any worthwhile data other than the quality of a keyword or ad. However even those stats are unreliable since the true value of a keyword or ad should still come from the ability to convert the clicks into sales. Again the metric falls short of providing any useful data.
Applying this Metric to Organic Search
The new ad format for AdWords, while losing its real estate on the right-hand side of organic searches has actually gained a great deal. Take a look at the search I did for “buy shoes.” Note, the first result above from Zappos. That’s a lot of real estate they’ve garnered for the cost of 1 click. Even the ad below it is more lines than your typical paid ad. Rich snippets are another feature that paid ads have gained. Note the 2nd and 3rd result have ratings. By adding rich snippets to their website code (a feature also available to the organic advertiser), these sites are able to gain the addition of their google reviews added to their ad. Notice anything else? How about how the paid ad listings are beginning to blend in more with the organic listings? Aside from the now very small square that says “Ad”, they look very similar to the other non-paid listings. It appears their new placement on the left side with the other results may be part of a strategic plan for Google. It seems they are trying to skew the typical percentages of clicks on a page in favor of the paid ads, since they currently do not get clicked on as often as the organic listings do. At least they didn’t when they were on the right hand side. I am guessing that has changed considerably with their new left-side location.
These new Paid Ads show at the top, sometimes middle and bottom of the organic results, omitting them from the right hand column altogether, is just one of the many upcoming changes to paid ads that will eventually even out the percentage of clicks each advertiser type gets. Historically, the organic results have received the largest majority of clicks, but that is likely to get closer to a 50/50 split and if placement has anything to do with that, the paid ads will be at an advantage.
For the organic advertiser, click thru rate will be an important metric to fine tune against some increasingly challenging competition. For years now we’ve seen the organic listings lose their prime page placement to increased map listings that started with a few but now sometimes have 7 listings, pushing the 1st organic result below the fold. In order to see the first result a user has to actually scroll down the page on some searches. Now we are seeing paid ads getting longer. Not just a little longer – a lot longer.
Google’s Intentions Are Geared for Paid Advertising
While the changes have been somewhat slow and spaced out over the last few years, if you add them all together they equal one glaring fact. Google is pushing for more advertisers in PPC. While this is not surprising, it could mean a few unwelcomed changes for organic and paid advertisers. Costs are likely to begin increasing as more advertisers sign on. In order to keep costs down and still capture clicks advertisers should pay special attention to ad relevancy and a well organized AdWords account structure that contains as many ad groups as there are products and possibly more depending how finite you think is necessary to get. For the organic advertiser with less control over which listing will show for which keyword, good onsite optimization will be key to ensuring you are relevant within a given search. Less overlap of multiple keywords for product pages will be essential.
Paid Advertising is a Worthwhile Consideration
Considering at least some paid advertising may not be a bad idea to map out keywords to certain pages. Even if you don’t have a lot of dollars to put into paid advertising, the smallest amount might be helpful for providing a road map for google while increasing your revenue at the same time. This is without mentioning the invaluable data you get from running a pay per click campaign. For this reason alone, it is a worthwhile form of advertising especially if you are just getting started online. The data you gather in the process can reveal the products in which you gain the most revenue from with the least amount of effort and money, and which products will need additional promotion, or better site visibility in order to increase sales. This data could take months, even years to figure out organically and if you consider time is money – well then you get my point.