Does Click-Through Rate Matter? Yes, But You Might Be Using It Wrong.

by | Jun 11, 2019 | Guides

Attention marketers: Please stop reporting on click-through rate (CTR) as a performance metric for paid digital media campaigns. 

It isn’t insightful, it doesn’t measure performance and it provides a false sense of success.

CTR was a fantastic metric when all you could measure off your digital ad buy were clicks and impressions. But it isn’t 2003 anymore. There are many more metrics at your disposal.

Yet we still see marketers today — in 2019 — using CTR to measure the performance of their paid media campaigns.

CTR as a metric has its use cases, but propping it up as a KPI will often get in the way of meeting your business objectives.

Here are three reasons why you should be careful about using CTR to measure the success of your paid digital media campaigns:

Setting the Right KPI Expert Guide Subhead: Educate

1. CTR doesn’t measure performance.

Your marketing efforts should be measured against your business objectives — typically revenue and customer acquisition.

Clicks don’t directly correlate to either.

Yes, a click is required to get a user to your website and ultimately become a revenue-driving customer, but there are many steps between a click and a conversion.

You simply can’t rely on clicks to measure success.

If you focus primarily on high click-through rates without thinking about the quality of said clicks, you might optimize yourself into a campaign that’s driving a ton of low-value clicks.

In other words, you’ve spent money to run a campaign that doesn’t provide any value to your business.

Focusing on metrics like viewability, inventory type and quality, cost, and device performance will help avoid the pitfalls of chasing a high CTR.

You can validate those decisions by measuring click traffic via website analytics and/or event tags (LumenAd recommends measuring engaged sessions).

Setting the Right KPI Expert Guide Subhead: Educate

2. Using CTR to measure performance encourages bad behavior.

When our team encounters a display tactic that’s driving high CTR — typically anything above 0.30% — it’s more cause for alarm than celebration.

In almost all cases, CTR that is far above expectation is artificially inflated by things like accidental clicks, forced clicks, and (gasp) fraud.

In these situations, it’s important to dig in and understand where those clicks are coming from and what they’re doing for the campaign.

When your CTR is high, be on the lookout for increased instances of mobile inventory on non-reputable websites, or heavy volume on obscure mobile apps.

An Example: CTR with Paid Search

It’s easy to chase high CTR in paid search campaigns because search consistently drives higher CTR than other channels (thanks to its ability to take advantage of users’ search intent).

It’s important to mention that you shouldn’t ignore CTR when running paid search campaigns. However, if it is your sole focus, you will end up running unintelligent campaigns that don’t focus on performance.

For example, the easiest way to drive high CTR in paid search is to bid on branded search terms.

In some campaigns, we’ve seen CTR on branded search campaigns reach 30-40%. With “performance” like that, it’s easy to see why marketers might funnel most if not all of their budget into branded search.

Is bidding on branded search terms a valid, smart strategy as a part of the greater paid search execution? Absolutely.

Is funneling all of your digital dollars into branded search terms just to meet vanity CTR goals a good idea? Absolutely not.

Focusing paid search efforts only on branded terms and other keywords that drive high CTR is the proverbial “low-hanging fruit.”

This strategy will certainly produce some ripe apples in the short-term, but undoubtedly start to break down over the long run and ultimately lead to stagnant growth of your new customer base.

Optimizing toward paid search CTR means marketers might overlook niche target audiences that are harder to find yet are still highly valuable (meaning lower CTR).

It also might mean optimizing away from broader keywords that might have lower CTRs but high volume and conversion rates.

And in cases where you’re targeting lower positioning (like higher-funnel campaigns or keyword testing), you’ll struggle to find a CTR benchmark.

Optimizing with CTR is okay in certain instances — mostly low-funnel searches with little variability of search intent and/or target audience.

The point is: CTR misses the broader picture of performance, and optimizing towards it may encourage over-reliance on strategies best used with discretion.

How CTR Might Affect Margins

Focusing on CTR might enable (and even encourage) vendors to increase margins.

This is because they can focus on lower quality, cheaper inventory that clicks through at a higher rate, while still offering the same (or increased) CPMs for those impressions.

At the end of the day, your campaign will have effectively driven a high CTR, but also paid a CPM premium and put your brand at risk of showing up on fraudulent, unsafe, and low-quality websites.

By using CTR as a KPI, you’re putting your vendors in a tough spot that doesn’t encourage them to act on their best behavior. We see it all the time…

“Well, our previous vendor was driving a 0.28% CTR… can you beat that?”

The answer is yes, we can beat that. If you want clicks, we can get you clicks (Flashlight App, anyone?).

But we don’t want to because it is not in the best interest of the customer or its business objectives.

Setting the Right KPI Expert Guide Subhead: Educate

3. CTR doesn’t hold up during cross-platform monitoring and reporting.

A quick Google search will provide CTR benchmarks for specific digital channels.

However, those benchmarks vary greatly due to the efficacy of each channel, as well as other factors like inventory cost, creative messaging, brand recognition, frequency, etc.

Paid search will always have a higher CTR (~2% average) than display (~0.15% average) because it’s a bottom-funnel channel (meaning it takes fewer impressions to drive a greater number of clicks).

Head to the top of the funnel and you’re buying a higher volume of less-efficient impressions.

By definition, click-through rate measures the ratio of clicks to impressions.

But those ratios are almost entirely dependent on the individual channels, not the performance of the media plan.

This makes running a cross-channel campaign using CTR as a KPI near unmanageable.

Aggregating and analyzing disparate data sets with wildly different ratios morphs your metrics into a sort of squishy hybrid that doesn’t provide any tangible value.

That’s why there’s not one concise answer to the “CTR benchmark” question. There is no across-the-board benchmark, nor can there be.

While not a perfect solution (since you’re still just focused on clicks, not performance), measuring something like cost-per-click (CPC) would be a better option for cross-platform click data analysis than CTR.

With CPC, you’re reducing the variability of the other metric in the data set — cost. 

A dollar is a dollar, no matter where you’re spending it. With CPC, your data set will (at least) have a baseline for analysis.

You’ll understand the clicks’ relationship with your ad spend rather than the clicks’ relationship to impression volume.

Then, you can make decisions about how much clicks are worth to you in each of the platforms (based on post-click analysis, hopefully!).

 

Here’s a quick breakdown of the above:

Say you have a $2000 to spend on a digital campaign. You buy $1000 in display at a $4.25 CPM and $1000 in native at an $11.25 CPM.

The display channel drives a 0.15% CTR, while native drives a far-superior 0.25% CTR.

Boom! Done, right? Native out-performed display and I’ve done my job for the day.

Sure, if you’re just using CTR for optimizations, you’d think native is driving better performance.

While native is driving clicks at a more efficient rate when compared to impressions, it’s actually lagging behind the display platform when looking at actual cost.
 

  • Display ended up driving 353 clicks at a CPC of $2.83
  • Native drove 222 clicks at a CPC of $4.50

Assuming equal click quality, the display effort is 45% more efficient at driving clicks, despite driving a 50% “worse” CTR.

So, does click-through rate matter?

 

To summarize, using clicks, and more specifically click-through rate, as a measure of success for your paid digital media efforts is a relic of the past and should be avoided whenever possible.

There are times where you cannot measure anything besides clicks, but in those instances, I would encourage marketers to focus on CPC and/or viewability instead of CTR.

There is also a time and a place (single-platform optimizations with limited variables) to take a peek at CTR during your analysis, but propping it up as a KPI will hinder your campaigns and reduce your chances of meeting your business objectives.

 

For more expert insights like this, subscribe below or schedule a demo to start working with us.

 

 

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