Internet Marketing & SEO

The most important pay per click metric is not click through rate

Sunday, May 6th, 2007 | Contextual Advertising, Google Adsense & Adwords, Internet Marketing, MSN adCenter, Yahoo! Publisher Network

It is still amazing to me the number of people who care most about what their AdWords or Yahoo Search Marketing CTR is on their ads, while seemingly ignoring what is arguably the far more important - not to mention valuable - pay per click metric. Yes, CTR is valuable to know, but in reality, a higher CTR doesn’t necessarily equate to higher profits or sales.

So what is the most important metric for pay per click advertisers? ROI. The Return on Investment is the most critical metric to consider when tweaking PPC campaigns. But not only do too many people give an in proportionate amount of time focusing on their CTRs, many of those same people are doing so without a clue as to what their ROI is! They are simply working off the assumption that higher CTR must mean higher ROI, without having the data and stats to backup their beliefs. This thinking is so flawed when ROI isn’t be tracked.

Ad copy has a crucial impact on CTR. But it is not unusual to have an ad with a higher CTR actually perform far worse when looking at it from an ROI standpoint, while an ad with a lower CTR convert several times higher for the identical product… even with the identical landing page. Why is this? Because ads can definitely be written that tend to bring greater numbers of clicks that don’t lead to sales.

For example, you could write one ad without a price, or even wrongly implies a fabulous deal or freebie offer, or a comparison shopping site that will offer a variety of pricing from many different online retailers. These types of ads tend to have a higher CTR because they are much more likely to bring in clicks in droves, while those clicks tend to have a much higher percentage of “looky-loos” who aren’t prepared to type in their credit card number and complete the purchase.

The second ad with a price in the ad copy will have fewer clicks, since people don’t need to click to see your price and then click back to check out your competitors. But even though you have fewer clicks, they are more qualified since they already know your price and are less likely to be in that comparison shopping phase and are more likely to be further along in the buy cycle. Now, your CTR is lower, but so is your cost of acquisition. This results in an ad with a lower CTR but with a much higher ROI.

Are you not tracking your ROI yet? You definitely need to be using one of the many PPC trackers out there so you can properly monitor relationships between CTR, ad spend and sales, so you know exactly what your ROI is on every keyword you bid on. This will also allow you to reduce your overall spend by getting rid of under-performing ad copy and keywords, as well as potentially upping your bids on the golden keywords… the ones that have that great ROI you really don’t want to live without! Putting steps in place so that you will know what your ROI is should be at the top of your PPC to do list, if you are one of those advertisers who currently does not not track it and uses CTR to gauge campaign success.

So while CTR is an important metric for any pay per click advertiser, you need to be certain you are not sacrificing a higher ROI for that higher CTR. ROI is definitely your most important pay per click metric, and this should be the top priority in any pay per click campaign. Because at the end of the day, only your ROI is directly related to how much money you make at the end of the day.

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