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25 Nov
Does My Low Click-Through-Rate Cost Me More?

Posted by Chuck Bankoff On November - 25 - 2010

The great thing about Pay-Per-Click (PPC) is that you only pay when someone who is looking for your products or services actually clicks on your ad and goes to your website. If only a few people who search on your keywords actually click through, no big deal right? After all, you are only paying for the ones that do.

Not so fast….

There is a little thing Google calls their “Quality Score.”

The Google Quality Score is determined by a variety of different factors, but I want to focus on only one for now: Click-through-rate (CTR). That is the percentage of the times that your ad has the “potential” for being seen on the search results, verses the actual times it is clicked on.

Note that I said the “Potential”. That means if you bid too low and wind up on page 3 of the search results, technically your ad has the “potential” of being viewed… but it is unlikely it will ever be seen or clicked on.

Your quality score is updated often. In fact every time your key word has the “potential” for being viewed, your quality score is recalculated. Why does Google do this? They tell us it is their way to help serve up the most relevant results. Since CTR is only one factor in the Quality Score that affects user experience, I’m certain this is valid. However I believe there is also an economic component to this.

Let’s do the math:

Suppose your competitor is paying $2.00 per click for a certain keyword, and on average they get about 100 clicks each day. Google would make $200 per day.

Suppose you are also willing to pay $2.00 per click for that same keyword, but you only average 50 clicks per day. You only made Google $100, whereas your competitor makes them $200. Google likes them better…

Suppose that you are willing to pay more per click to show up above your competitor in the search results, but you still only get 50 clicks per day. How much more do you have to raise your bid before the economics work out in Google’s favor?

Here is the bottom line… Google may actually place a lower bidding ad higher up in the search results because it is making them more money by earning more clicks (and making them more cash).

What are some of the factors that affect CTR?

  1. Positioning on the search results: Generally the higher you show up in the search results, the more clicks you will get. That does NOT necessarily mean that you are getting a better ROI.
  2. Relevance of the ad to the keyword being searched on: If you are using an “all purpose” ad for a bunch of loosely related keywords, less people will click on your ad because it doesn’t appear to meet their search requirements.
  3. Quality of the ad: The more intriguing the ad, the better chance you will spark the searcher’s interest and earn a visit.
  4. Brand recognition: If your brand is more recognizable, you stand a better chance of getting that click.

There is a fine balance between paying more for a higher position to increase your CTR, and maximizing a more economical slightly lower position (a much better strategy).

As a side note, every time that you search on your keyword to see where you rank and you don’t click on your own ad, your quality score just suffered a little bit. I’m not suggesting that you actually click on the ad yourself (you don’t get a discount from Google because it’s your ad). I am suggesting that you trust your reporting metrics, or enlist the services of a PPC management professional to monitor performance and optimize your digital marketing campaign accordingly.

Learn more about how a properly implemented pay-per-click campaign can increase the targeted traffic to your company’s site.

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Category: Search
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About the author: Chuck Bankoff
Chuck Bankoff is a WSI Certified Research Analyst, and has certified other WSI Consultants around the world in Landing Page Design and more


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