Definition:
Click-through rate is the percentage of clicks you receive on your ad compared to the total number of impressions.
Before we move on, you have to understand the difference between clicks and impressions. They are not the same thing.
Impressions are instances of your ad appearing in front of an audience. Click-through Rate is recorded only when that audience actively clicks on the ad. Cost Per Impression and Cost Per Click therefore are very different things.
Formula to Calculate Click-Though Rate (CTR):
CTR= (Number of clicks per ad ÷ Total Number of impressions for that ad)X100
You obviously understand that having more people click on your ads is a good thing. It brings more people into your Sales Funnel. However, did you know having a good CTR is necessary to save money?
Let me simplify this for you.
How Does A High Click-Through Rate Save You Money on CPC?
Google makes you bid on ads under the Pay-Per-Click (PPC) model of advertising. Basically, every time someone clicks your ad, you have to pay Google for it. The money that you pay when an ad of yours is clicked on is called Cost Per Click (CPC).
But where does CTR come into the picture and how does it save you money?
The rank that Google gives you after the bid, does not just depend on how much you pay. If that was the case, then sites would just focus on ad bids instead of making good content. Google also REALLY cares about the quality of content and the relevance.
Therefore, bid is not the only thing that matters. A good Click-Through Rate also ensures you a top Google rank. Wondering how?
Ad Rank = Maximum CPC Bid X Quality Score.
This Quality Score is dependent on several factors, one of which is CTR. The quality of your landing page and the relevance of your content also matters.
The following graph shows the correlation between Quality Score and CTR:
As you can clearly see, more CTR= more Quality Score.
In short, since Google really cares about quality and relevance they want sites which possess both to pay less.
Therefore, if your Quality Score is high, you need to pay less money to attain the same Ad Rank? Get it?
And since your Quality Score is directly dependent on your CTR, a higher CTR means a higher Quality Score.
So, if you have a high CTR, you need to pay less!
Now you know what Click-Through Rate means and also how it can actually save you money!
Want to know more about your industry’s CTR in particular? Mention your industry in the comments below and I’ll let you know the answer!
