PPC Terminology: Click Through Rate

More than just about any other part of my job as Paid Search Specialist, I get asked about terminology.

“What is CPC?”
Answer: Cost Per Click

“How do I figure out an ROAS?”
Answer: Calculate your Return on Advertising Spending by dividing revenue from an ad by the cost of that ad.

“Why on Earth do I need to call my CPA to read this report?”
Answer: Cost Per Action is another way to manage online advertising. This kind of CPA won’t call you back.

CTR: One of the Most Important Metrics

Click Through Rate in Paid Search

I would like to take a closer look at one of the most important metrics in every single paid search account: “Click through rate”—or CTR, as you may have heard it. On the surface, CTR is just like playing Temple Run. It’s easy to understand on a surface level. Yet things get a lot more complicated if you want to get advanced with it. Also, crocodiles are involved.

The basics of CTR are simple. You take the number of clicks during a specific time period, divide it by the number of impressions received over that same time period, and BAM! You have your CTR. One hundred clicks coming from 1,000 impressions? You have yourself a cool 10.00% CTR. Your job is done. Pack it up, time to go home, right?

Well, yes, and no.

Technically, yes, that 10.00% conversion rate is impressive if you look at just the overall number alone…but is that really what’s going on? A closer look at your account may show that 60% of the clicks you received are from brand-name terms, which should always have a high click through rate. Let’s say that those 60 clicks have a click through rate of 30%. That would mean that the non-brand terms in your account would have a click through rate of just 5.00%. Now a 5.00% CTR in most verticals is really strong, but it’s nowhere near the 10.00% you thought you had going for you in this completely made up scenario that I’ve presented. It’s just a cautionary tale about calculating CTR and how you can’t just take the overall account number at face value. Here’s a visual of what that scenario would look like:

Like I said, the brand numbers for CTR are strong, but those are expected to be strong. Seeing that all non brand terms have half the CTR as the overall account means that some work can be done to bring that number higher.

However, the same can be said of the opposite. If you have an abysmally low CTR (something below 0.10%), there’s a good chance that you’re opted into Google’s Display Network. The Display Network is a good source of cheap traffic, but it’s very low conversion AND very low CTR. Just as a refresher, any of your campaigns that are opted into Google’s Display Network will serve ads on the sidebar or the bottom of related articles across the web. In other words, your ads will show up thousands of times a month in front of people who aren’t searching for your company or services, therefore, the Display Network traffic always has extremely low click through rates. CTR for Display Network traffic is usually around 0.01% to 0.03%It’s important to separate Display Network traffic from regular search traffic. More times than not, you’ll see that a 0.02% overall CTR actually has a CTR of 3.00% – 4.00% for search engine traffic. In paid search, you never miss out on a chance to show what an awesome job you’re actually doing.

For example, take a look at this screenshot. Click through rate is the percentage on the far right:

According to this, the overall click through rate for the account is a dismal 1.87%. However, if you look at the click through rate from Google Search alone, it’s a much stronger 11.78%. It’s only the Display Network and its massive amount of impressions (over 6 times that of traditional Search) that artificially drags the overall CTR down. For reporting purposes, I would peg the CTR for this account at 11.78% and completely leave out Display Network traffic. That’s the only way to calculate your true CTR.

The moral of the story is this: don’t just take the overall CTR of your account and call it a day. Yes, it’s still a nice number to measure, but it’s not 100% of the story. Dive a little deeper, even to the keyword level, and figure out what’s going on in your account. It can be a good way to pinpoint what ad copy is and is not working.

As for how crocodiles are involved…well they could be anywhere, right? Just keep an eye out. We’ll all be better off that way.

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  • dean jackson

    You are 100% right about utilizing targeted ad copy and keyword structure – we have a client in the automotive tires/rims business and it is mostly about long tail for them with specific radius and wheel width sizes doing really well in aggregate. If you’d like me to look at your account and brainstorm some suggestions email me at simon.b@resultsdriven.org. or we can setup a quick call if you prefer phone 302-401-4478.