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Perils of PPC Click-Through Rate Analysis

As a core component of paid search quality score, a strong Click-Through Rate (CTR) is vital for ensuring lower costs per click and higher ad visibility.  If you are seeing your CTR decline over months or years it can be concerning, but not necessarily an indication of a problem with your copy or PPC program as a whole.

Compared to other data points, CTR is a relatively unreliable metric for judging the health of a paid search program over time because there are so many factors that need to be accounted for, some of which the advertiser has little to no control over.

If you're worried about how your CTR looks month to month or year over year and are considering widespread copy changes, here are some factors to consider first:

Search Network Expansion: For many, traffic from the engines' search networks is growing faster than traffic on the engines themselves.  Click-through rates on this partner traffic also tend to be significantly lower,  by as much as 50-90%.  If you were to make no changes to how your ads were syndicated, you would see a lower CTR just from the expansion of the search network.  The upside is that the lower network CTR should not affect your quality score on the core domain. 

As Google states: CTR on the Google Network only ever impacts Quality Score on the Google Network -- not on Google. So, if the network traffic is otherwise performing well, no changes are necessary, but its effect on overall CTR should be noted during trend analysis.  To get a more consistent view of your CTR over time, parse out the network traffic in the engines' reporting tools.

Competitive Landscape Changes: An ad's position on the search results page has a major impact on its click-through rate for obvious reasons.  As Google's Fred Vallaeys succinctly puts it: An ad in a higher position is predisposed to get a better CTR. If a high-bidding competitor swoops in and bumps you down a spot, you are virtually guaranteed to see your CTR fall.

If you are bidding based on efficiency and not position, as RKG recommends, you are left to accept the lower position or work to improve your quality score or conversion metric to try to overtake the competitor.  Copy or landing page changes could help, but if you've already optimized in those areas, you may be better off working to grow the program where there is a greater potential return on your sweat equity. 

With any luck, the competitor will find they are overspending and you'll see your position and CTR improve when they reduce their bids. Note that Google's Quality Score is normalized to account for the expected click-through rate differences in different positions, so all else being equal, falling a spot due to changes in the competitive landscape should not hurt QS.

Broad Match Expansion: The engines, particularly Google, are regularly tweaking how their broad match algorithms function.  This requires them to balance ad relevance and revenue, but in recent years, the short-term revenue side has been winning out.  A broader and broader definition of broad match leads to keywords showing for more distantly related search queries and click-through rate suffers as a result.

The upside again is that Google is smart enough to take this into account when determining Quality Score, which is based only on the performance of the keyword when it matches the search query exactly.  (Consequently, changing a keyword's match type from broad to exact will not improve its Quality Score.) 

So, seeing a lower CTR due to increased broad matching is not a great reason to make copy or match type changes in and of itself.  At the same time though, this scenario may indicate that your account could use negative or tail keyword additions (with better targeted copy and landing pages) or increased parsing of exact and broad match traffic, assuming the broad match traffic converts at a lower rate.

Ideally, in our analysis we would account for the wider scope of broad match by looking only at CTR data when the search query matched the keyword exactly, regardless of the keyword's match type.  Unfortunately, that's not an easy task at adgroup or higher levels unless you are running mirror campaigns under different match types.  Even then, there may still be some bleed over.

Other Considerations:

  • Portfolio effects: If you are frequently making keyword additions and bid changes, you may see your high level CTR stats improve or decline based on the type of keywords that receive more or less traffic after the changes.  In other words, click-through rate trends at an account, campaign or even adgroup level may not be telling you what you think they are.  For instance, growing incremental traffic while maintaining target efficiency is the goal for most advertisers, but it will lead to a lower account CTR as brand traffic with its higher click-through rates will make up a smaller proportion of the program.  Make sure to use as fine a level of detail as necessary to get an apples to apples comparison over time.
  • Efficiency target changes: Aiming for a different ROI is likely to result in changes to your average ad positions and your CTR will change as a result.
  • Content:  Impressions from contextual ads can fluctuate wildly, so content traffic should be parsed from search traffic by all means.

For an indication of what advertisers are up against, here's a chart of RKG's observed year over year change in Google Search impressions for a basket of well established clients versus the Y/Y change for Google Sites traffic under Comscore's Core Search Report:

Even though we are taking regular steps to reduce poor quality broad match traffic, we have still seen our Adwords impressions balloon faster than clicks and much faster than traffic to Google and its partners as represented by the Comscore figures. 

We've heard others recently ascribe lower CTRs to changes in consumer behavior during a weakened economic environment, but that would seem to be a minor effect relative to the changes coming from the engines.

Bottom line, if you are generating more traffic at the same efficiency despite lower click-through rates, chances are your program and copy are still in decent shape.  That's not to say you should ignore the CTR metric, just be sure you know what the data is really saying before you change your optimization priorities.  Ideally,  PPC advertisers would have access to a more precise reading on quality score to steer by, but we'll have to make do with what we have now.

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