Why Click Through Rate Is So Underrated?
Updated: Sep 8, 2023
When people talk about marketing, they often talk about ROIs and KPIs. They rarely mention the term click-through rate (CTR). If you are not already familiar with this term, click-through rate is defined as the ratio of users who click on a specific link to the number of total users who view a page, email, or advertisement. In other words, from all the people who saw your ad your click-through rate will be the percentage of people who clicked on the ad.
Why is CTR so important? Most major advertising platforms charge based on the cost per impression. This means that you always pay the platform through the purchase of impressions.
Yes, some platforms let you pay for a click or a conversion, but the way the price is set is based on the market cost per impression. All major platforms work on a bidding system. The more advertisers that target a specific keyword, audience or placement, the higher the cost per impression will be. Understand that regardless of your marketing objective or the website that you are advertising on, the cost of ads will always be based on cost per impression.
The cost per purchase you get, the cost per click, cost per engagement and any other metric that you evaluate comes simply from the basic breakdown of how many impressions you bought and how many users clicked on your ad, how many purchased and how many engaged with your ads, etc.
Let me break this down for a second. If most industries get a click-through rate of 2% it means that, from your initial ad, you are already losing 98% of the people who saw it. Isn’t that insane? After all the work you’ve done, everything you built, to cut 98% of your reach from the start sounds crazy!
Here is an example of how it looks if both advertisers are competing for the same audience on Instagram and are both paying $10 for 1000 impressions:
Advertiser 1 has a click-through rate of 1.5%, which means that he is getting 15 users to click through to his website.
Advertiser 2 has a click-through rate of 3%, which means that he is getting 30 users to click through his website.
Let’s assume both advertisers have the same 1% conversion rate on their website. Here is a breakdown of the results they will both get after spending $1000:
As you can see, Advertiser 2 got a cost per conversion that was half the cost of Advertiser 1. And this is only when examining $1000 in spend. Imagine how big of a difference it will make when we look at a much larger spend over a longer period.
I like to think of CTR as a gatekeeper, where the goal is to get as many impressions as possible through the first gate. This is your first segmentation where you lose the majority of your impressions, so every small improvement in your creatives or audience relevance can mean another visitor or visitors for the same cost.
But before you get too excited, you need to be aware of the data manipulation. Most advertisers are not aware of how every metric they measure can be manipulated.
CTR, COST PER CLICK, OR COST PER ENGAGEMENT CAN BE EASILY MANIPULATED
This might be confusing for some, but because of the optimizations that major social networks have made in recent years, they can easily segment and show your ad to people who are likely to perform a certain action. They know who tends to click, who tends to engage and who tends to purchase.
Most platforms now require you to state your final objective (i.e. get purchases, get traffic, etc.) before launching your campaign. The reason they ask for this information is to allow them to segment your audience based on your goal for better results. So you can pretty much manipulate everything.
If you wanted a better click-through rate, you can optimize for getting clicks and your ads will be placed in front of people who click on ads frequently. You can increase your conversion rate by placing your ad in front of your prime audience only and increase your website conversion rate.
The point here is that your goal should always be to improve your click-through rate without changing your audience or targeting settings. You want to see improvement when testing the new creatives against the exact audience, so you can make a comparison and see real improvements.
The creatives in your ad need to make a real difference. No single solution fits all for creating ads with better CTR but you can use common sense. People come to Facebook, Instagram, and Snapchat for entertainment. They don’t want to see boring ads. In fact, very few of them even want to see any ads.
Keep it authentic, entertaining or interesting and think of what your target audience might find attractive. I believe that we are moving towards a new marketing era where less is more. Videos and images taken from a smartphone will perform better than studio-produced video. People like to see products, not ads. Try to make your ads different.
CTR is a metric that measures the ratio of people who clicked on your ad from all the people that saw your ad. CTR is often overlooked and not appreciated for its real value: impacting your overall cost per acquisition. Original and top-performing creatives are what will make a real difference in your click-through rate. Focus on your creatives more, and test them against the same audience to see a big impact.