Click-through rates play an essential role in the success or failure of pay-per-click advertising campaigns, but there is no single determination as to whether a CTR is good, fair or horrible. While it’s true that calculating a CTR is as easy as dividing clicks by impressions, the variety of moving parts in PPC campaigns run by different companies in different industries means that this metric cannot be assessed in a one-size-fits-all fashion. Instead, when businesses are trying to get a handle on how their advertising initiatives are faring, CTRs should be compared only against direct competitors that are using similar strategies.
So, What is a Good Average CTR?
Unlike baseball metrics where a lifetime batting average of .300 almost guarantees a spot in the Hall of Fame, CTR values move along a sliding scale with variables that include keywords, the industry and advertising channels. Under these circumstances, a CTR value that looks dreadfully low when compared to ads run in different environments may actually represent a great score versus ads that encountered similar variables.
For example, the CTRs in Google’s Display Network, which places ads on relevant websites within its realm, average .06 percent according to Doubleclick. This number compares dismally against the CTR average of 2 percent in Google’s Search Network, but the landscapes of these two channels are completely different. On the Display Network, ads are presented on relevant websites but, generally speaking, visitors on those sites are not in “search mode” for the products that are being advertised. People use the Search Network to (you guessed it),search for products, services and information, which results in a higher average CTR. In this example, a CTR of 1.2 percent for an ad on the Display Network would be a strong showing, while the same value on the Search Network would indicate that the ad might need to be re-worked.
CTRs and Quality Scores
In its quest to optimize user experience, Google does everything it can to ensure that results are highly relevant to search inquiries. When it comes to measuring the user experience with ads on its network, the search engine assigns “Quality Scores” based on a variety of data points, with the CTR being one of the most important factors in determining the total score. A second factor in assigning Quality Scores is that Google earns about 90 percent of its revenues from advertising, and positioning the ads with top scores in the highest visibility areas on each page increases the chances that revenues will be generated as ads are clicked.
Google, as well as Bing Ads, rank Quality Scores on a scale from 1 to 10 with 10 being the highest possible score. Factors that go into the Quality Score algorithm include the overall performance of each ad, as well as individual components including ad text, relevance to search inquiries, keywords and landing pages. In many ways, the CTR provides a measurement of the combined performance of these components, which is then represented by the Quality Score assigned by the search engine. In AdWords, Quality Scores can be found under the “Keywords” tab for campaigns and ad groups. Look for the speech bubble for each keyword in the status column, click on it and the score will be displayed.
The Benefits of a High CTR and Quality Score
Much like following the search engine’s best practices for optimizing pages for organic searches, giving Google what Google wants in terms of a relatively high CTR that translates into a top Quality Score yields several benefits, including higher page placements and lower costs per click. These benefits play out when Google (or Bing) determine Ad Ranks for ads that are competing in auctions. In the basic calculation for determining Ad Ranks, each ad’s Quality Score is multiplied by the maximum CPC bid. The ad with highest score then wins page placements with the best visibility.
Generally speaking, ads with high Quality Scores (resulting in large part from high CTRs) can reduce actual CPC costs versus lower scoring ads while still winning optimal page placements. The net result is that companies that are sponsoring ads with low scores can only compete for those placements by increasing their CPC bid prices. In these situations, it’s not uncommon for ads with low Quality Scores to cost more per click than high scoring ads with better page placements.
While there is not a definitive value that defines a good average CTR, this metric will play a vital role in the execution and success of your online advertising campaigns. As a standalone valuation, the CTR in each of your ad campaigns represents only a single data point, but don’t underestimate its importance as a barometer of how your PPC advertising initiatives are faring against your competitors at the front end (your conversion ratio will define success at the back end). CTRs will also be a major factor in the calculation of the Quality Score for each of your ads. The Quality Score, in turn, will be the primary factor in the placement of your ads as well as how much you pay per click.
If you look around, you’re likely to find an infinite number of tips on improving CTRs for your ad campaigns. You don’t have to try all of them, but testing and optimizing your campaigns with new tactics can help to keep you ahead of the game. If you find it difficult to come up with meaningful performance comparisons, set your own benchmarks and work on building your CTRs from there. Over time, with the consistent improvement of your CTRs, your Quality Scores will stay strong, you’ll earn quality ad placements and your campaigns will be run at peak cost efficiency.
Main Street ROI is a digital marketing agency based in New York City.
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