What is a Click-Through Rate?
A click-through rate represents how often a consumer clicks on your ad after seeing it. In other words, the percentage of people who view your ad (impressions), that then click on it to learn more. The formula for a click-through rate is number of clicks divided by total impressions. A click-through rate is important because it shows the effectiveness and impact of an advertisement. It is an objective view of how often your ads turn a viewer into a potential consumer. It can be used to show the return on your investment when it comes to paid advertisements.
How a Click-Through Rate works
It is a simple formula
A click-through rate is found through a simple formula, and shows how often an advertiser converts an impression into a click. The formula is: total advertisement clicks / total impressions = click-through rate. This percentage shows how often a consumer clicks on one of your ads after seeing it.
It measures ad effectiveness
Click-through rates are an objective way to measure the effectiveness of your ad. The percentage shows how often your ads convert viewers into clickers, whether its for a product, service, event or other kind of awareness building campaign. The measurement can also be used to calculate the cost of each click, in relation to the money spent on certain advertisements. The average click-through rate in Google AdWords, across all industries, is 1.91 percent on the search network.
It shows your knowledge of consumers
Click-through rates are one of the ways online search engines rate your advertisements. The higher your click-through rate, the more likely you are giving your consumer what they want to see. In other words, your ad popped up, and whatever it offered the viewer made them want to click. Your ad does this through enticing them or giving them what they were already looking for. This return on investment is crucial when it comes to Quality Score, which is explained below in "Why it Matters".
Why a Click-Through Rate Matters
It shows objective results
Click-through rates represent your advertisement's return on investment. The percentage shows how often your ad converts viewers into clickers. A high click-through score shows your ads are driving the highest number of people possible to your product, service or company.
It impacts your quality score
A quality score is a measurement used by search engines to rank advertisements and their impact on consumers. A quality score represents an advertisement that consumers find favorable, and therefore click on more often than not. A high click-through rate translates into a high quality score. High quality scores will get your advertisement prioritized over others, in a search engine list. It can also get you good advertising placement for lower cost.
It helps you make decisions
The click-through rate is a tool you can use to make decisions about your advertising campaigns. Perhaps your click-through rate is high, but your number of impressions is low. You know you have a good advertisement but you aren't reaching enough consumers. On the flip side, if you're reaching a high number of consumers but you aren't converting the impressions to clicks, you may need to revamp the advertisement itself.