Thursday, October 04, 2007

Click-Through Rate is Overrated

Don’t get me wrong. Free of any other influences, Click-Through Rate (CTR) is a tremendously valuable metric for a Search Engine Advertising (SEA) campaign. In the real-world management of a campaign though, it needs to be analyzed and utilized in the proper context. Google, Yahoo, and MSN all factor CTR into the quality scores they use to determine ad placement and cost-per-click. (At least Yahoo has the caveat that they use CTR relative to ad position. Google and MSN don’t specify that as a factor.) This makes CTR a pretty important piece of the puzzle; more important than it should be.

The search engines’ basic logic makes sense for their revenue models. A higher percentage of people clicking on an ad means that ad appears to be more relevant to the searcher, and better from the search engine point-of-view, than other ads. Of course,”better” translates to “more money” for the search engine. My question is, should we manage for the highest percentage of people or the highest quantity of people? They’re not necessarily one and the same.

We have two keywords currently gaining clicks at the same CPC. One has a 3.27% CTR. The other is 1.80%. Which one is performing better for the client? I wouldn’t be writing this if it was the 3.27% ad, but thanks for playing along. That one only gained 8 clicks. The ad with the lower click through had 33.

When you consider that ads displayed in higher positions (driven by higher keyword bids) typically have higher CTRs, doing what’s best for the search engines can become very expensive for the client. My point is, within a realistic budgetary framework, the idea should be to use your money to drive the highest quantity of targeted unique visitors, not the highest CTR. Click-Through Rate measures the performance of a keyword and ad. It should measure clicks, not influence them.

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