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How to calculate your PPC click-through rate

Click-through-rate (CTR) is an important metric for PPC advertisers and search engines. As a digital marketing agency – we use CTR as a metric to gauge how well things like keywords, ads and product listings are performing.

A high click-through rate means more money for search engines and generally, more revenue for businesses. If your ad is being clicked on at a higher rate than your online competitors – then you will be rewarded with a higher quality score. That means you’ll pay less for each click.

How do we calculate click-through rate?

To work out your CTR, take the number of clicks that your ad receives and divide this by the number of times it is shown (clicks ÷ impressions = CTR). For example, 5 clicks with 100 impressions would give us a CTR of 5%.

Average CTR calculation
CTR Calculation

Click-through rate in Google Ads

Your average CTR is the ratio of clicks to impressions within your Google Ads campaign. You can calculate the basic CTR which measures the rate of clicks on each individual ad. The average CTR calculates the amount of clicks vs impressions across a campaign or for each keyword.

What should you consider when evaluating your click-through-rate?

We are going to take a look at how effective this approach to CTR is. When calculating click-through rate in Google Ads – users may forget that it’s not a clear representation of the ‘bigger picture’. For example, when a user searches on Google, they have the choice between paid and organic listings.

PPC and SEO working together

As a business, you may be generating clicks from both your paid and organic listings. Especially if you’re also running an efficient SEO campaign. Taking this into consideration – your CTR may not be a clear representation of how well you are performing.

PPC and SEO can often work well hand-in-hand for online businesses. Despite having a low CTR – you may be performing well on the organic side. If this is the case, there is less need to worry too much about aiming for a higher CTR as the two channels are working well together.

Considering the correlation between PPC and SEO activities – you may want to calculate your CTR based on both organic and paid listings. If this is the case – then you will need to work out how many clicks a specific keyword has driven over time for both paid and organic clicks. 

This would involve knowing the number of clicks as well as the overall keyword search volume. This can be a tricky metric to estimate but we’d recommend using a tool such as Keyword Planner.

What is the average click-through-rate for a PPC ad?

We are often asked what the average click-through-rate is for a pay-per-click ad. The answer to this question would depend on a number of factors surrounding your ad. For example, CTR as well as other key metrics such as conversion rate – will vary depending on the industry your business is in. This is mainly because some industries are more competitive than others. There are industry-specific benchmarks for average CTR.

Other factors that will impact your CTR calculation include:

  • Your set of keywords.
  • Your goals.
  • Individual campaigns within your PPC account.
  • Your network,

We touched on how CTR differs between campaign types previously. A prime example is a Google Shopping ad. A shopping ad is much more likely to have a higher click-through-rate than a display campaign. That isn’t because the display ad is poor quality. A shopping ad may increase CTR because of its features -i.e. Images, live pricing and more.

What to do with a low CTR?

There are some best practices you can follow to work on CTR. Here is a list of a few things you can consider if you’re finding that your click-through-rate isn’t improving:

  • Changing keywords: A low CTR may be a sign that you’re targeting the wrong audience. Adjust your keywords or re-think the targeting elements in your ads.
  • Improving ad copy: The words you use will either engage customers or drive them away. Make sure you’re speaking the language that appeals most to your target audience.
  • Adjusting the call-to-action: Stay away from generic and demanding CTAs like “click here”. Focus on highlighting the benefits a customer will get by clicking on your link such as: “Get your free download”.
  • Know your audience: Make sure you understand the audience you’re appealing to. When are they most active on the marketing channel you’re using? Which words and phrases do they like?
  • Updating design: If your ads include visual elements, try altering everything from the colors, to the images you use.

CTR is an important metric, but it’s not something you should be focusing on alone as one key performance indicator (KPI) – especially if that causes you to abandon other key metrics such as conversion rate.

Can a high click-through rate be bad for a business?

If you’re targeting a keyword that isn’t relevant to your business then it’s unlikely it will drive revenue, leads or brand development. A term with little relevant can still gain clicks – so it’s important to look at CTR alongside other metrics.

A strong CTR doesn’t always mean a successful PPC campaign – unless it is backed up by other areas. CTR is an important metric in PPC – as long as you’re not focusing on it alone and abandoning other key metrics such as conversion rate.

As an example – we could look at clickbait headlines. A PPC ad headline promising free products or other promotions is highly likely to drive a good CTR. However – unless the landing page directly follows up on the ad –  then you won’t actually be profiting from your clicks.

A high CTR with low relevance can be bad for a business for the following reasons:

  • You’re paying for each click.
  • You may be driving clicks fim keywords that are priced too high and not increasing your return on investment (ROI).
  • Irrelevant terms lead to wasted budget from clicks.

What can we take from this? When working to improve CTR – you should focus on keywords that are: 

  • Highly relevant – In terms of your ad copy, landing page, and product or service.
  • Affordable – Keywords that are going to improve ROI.

Feel free to get in touch if you have any questions on click-through-rate or how to optimise your PPC campaigns. Our PPC team will be happy to help.