Since its inception, digital advertising has been graded and evaluated by a metric known as click-through rate (CTR). This metric is calculated by the number of times your ad is clicked divided by the number of times your ad is seen.
There are many different reasons that users click on ads. If the ad is in social media, the user might have been enticed by an image that they were drawn to. For paid search ads on Google, a user might click the link without knowing it’s an ad trying to sell them a product.
What is CTR?
Click-through rate (CTR) is a performance metric expressed in percentages that measure the number of times an ad or email is clicked versus the number of times it’s been viewed (impressions). It is most commonly used to measure the effectiveness of paid search, display and email marketing campaigns and can indicate the performance of ad copy, subject lines, and metadata (titles and descriptions).
What is the conversion rate?
The conversion rate is the rate at which website visitors or potential customers take a specific desirable action. The actions desired in these conversion rates could include subscribing to newsletters, filling out forms, applying for credit cards, purchasing products or making service commitments.
What conversion rate metrics not do?
The rate is calculated as the number of potential customers or site visitors divided by the number that take the desired specific action. But conversion rate does not necessarily mean a conversion, does not tell you the quality of your visitor, can include malicious or bad clicks and the impressions are not necessarily acknowledged by users.
When calculating the cost per conversion, the click-through rate is not a factor. The more important metric is the cost per click (CPC). Because clicks on Google AdWords are sold in an auction-based bidding system, digital marketers have a lot of control over how much they will pay for clicks. Once a predictive conversion rate has been established, the maximum CPC can easily be calculated to provide only profitable conversions.
Just last week, Search Engine Land contributor and Google Director of Performance Ads Marketing Matt Lawson provided best practice recommendations to help advertisers make the most of the new format.
And here’s a final reminder about testing: Don’t overly fixate on metrics like click-through rate (CTR) and conversion rate. These new ad formats are about driving more impressions, clicks and conversions. There are all sorts of instances where you might end up serving impressions in a low CTR placement that you never would have qualified for before. A high CTR isn’t the end goal; it should be more sales for your business.
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