CTR can be a deceptive little metric in your paid search analytics.  Too often I’ve seen analysts base their entire optimization strategy on this single acronym–unfortunately, to the detriment of the campaign.  Let’s talk about what CTR is, how it is commonly misused in optimization, and how it should be interpreted in analysis.

What is CTR?

Standing for “click-thru ratio,” CTR represents the percentage of ad viewers who clicked on your ad.  It is calculated as follows:

CTR = (# of viewers who clicked on your ad) / (total # of ad impressions served up)

So each ad in your PPC campaign has its own CTR.  You can calculate a campaign-wide CTR by aggregating total clicks and total impressions.

How is CTR often misused?

CTR is often wrongly-used as the primary decision-making metric in optimization (persisting, removing, or changing ads, ad groups, budget controls, etc.).  CTR is such a catchy, convenient metric, but most of the time, it should not be the basis of your optimization decisions.  Here’s why.

PPC campaigns can have a variety of objectives (and it’s critical that you understand what your objective is).  More often than not, PPC has a direct response objective (buy a widget, call a phone number, request a quote, sign up for a newsletter).  Driving qualified traffic, then, means driving traffic that has a high propensity to complete the desired action.  So in deciding which ad copy is the most effective, or which ad group drives the highest quality traffic, you’d look at the conversion outcomes.

While that may seem obvious, it is not what many marketers do.  Instead, many look to CTR to give them answers.  Let’s consider an oversimplified example to illustrate why this can be problematic.  You sell red tennis shoes.  You run an ad with a headline, “Cheap Tennis Shoes!”  The ad has an extraordinary CTR–almost 10%!  Your ad with the headline “Cheap Red Tennis Shoes!” has a much lower CTR.  But which ad do you think drove the highest quality traffic, and consequently, produced the better return on investment?

If you’re new to PPC campaign management, beware, as text ad networks (particularly, Google) will often set your campaign to optimize to click-thru ratio by default.  This benefits no one but the ad distributor, as they are compensated based on clicks.

How should CTR be used in analysis?

While CTR generally shouldn’t be your ultimate decision-maker, it is by no means unimportant.  CTR can help you make the most out of your ads in the following ways.

• Targeting strategy.  If your click-thrus are extremely low, you might want to consider tightening up your targeting strategy.  Perhaps you’re casting the net too wide.
• Ad copy.  If you’ve found a highly-profitable niche target via one of your ad groups, analyze the CTR for each ad in the ad group.  If some of your ads have lower CTRs than others, run a test, and pause these ads.  You might see your traffic AND total conversions go up.
• Ad position.  There are many variables contribute to your ad’s position (including your bid and your landing page quality score), and CTR is one of them.  It makes sense, as the ad distributor has an incentive to reward high CTRs (higher CTR=more clicks=more ad revenue).  If you’re unsatisfied with your ad positions, consider your CTR.  Rewriting your ad may prevent you from having to raise your bid.

Best of luck in your pay-per-click campaign optimizing!

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