When everyone first start using Google Adwords (PPC advertising), they typically go through a steep (and expensive) learning curve. There are so many levers to optimize your campaign that it’s pretty daunting for new-comers. Eventually, most people figure out that CTR (Click-Thru Rate) is the key to Adwords success. The better the CTR, the cheaper the keyword bids will be over time.
What CTR should you target?
CTR will vary from keyword to keyword (in some sectors, people just don’t click on the ads as much). And of course CTR will vary depending on which position your ad is in (e.g. positions 1-3 usually get a lot of “blind clicks”, where searchers will automatically click on the first link without reading the ad, resulting in a higher CTR).
I usually aim for positions 4 to 7, but regardless of what position on the first page (positions 4 to 10), I’ve found that a CTR of 1.5% is usually a good target.
1.5% is the magic CTR target?
The actual target will vary from keyword to keyword (some search niches just don’t get that many clicks on ads). The majority of keywords that I’ve experimented with, vary from 1% to 2%.
Why should I care about hitting the target?
Google rewards those who have a good CTR by lowering your bid amount. That is, you can achieve the same ad position with a lower bid price (thus lowering your advertising costs) and/or give you a higher ad position (thus giving you a better position for the same cost).
If you exceed the CTR target, you’ll find that your cost will drop faster. So if you need to bid $2 to get to position 4, after 2 weeks, you might find that:
And so it goes. The price will drop faster, if you continually exceed the “target” CTR.
How do you find the “exact” target for any keyword?
This part is a little tricky. Firstly, before you analyze anything, make sure you have a “statisitcally significant” sample (which I would suggest to be AT LEAST 30 clicks). With a “statistically significant” sample, you should see what your aCPC (Average Cost Per Click) is compared to your Average Ad Position. That is your baseline.
Wait for another “statistically significant” sample, and then compare your aCPC vs Average Ad Position.
Wow, that’s alot of work. How did you ever figure out 1.5% is the magic target?
Remember, I never said 1.5% is the magic number for all keywords. I said most keywords’ target CTR varied around 1.5%. You’ll have to do alot of work to find the magic number yourself. But I wouldn’t recommend you waste your time. Just know that there is a magic number, and aim to get as high a CTR as you can.
But you said 1.5% for all ads on the first page? Surely lower positions (8-10) should have a lower target than 1.5%?
In a perfect theoretically world, that would be true. But for most keywords, there are more than 10 advertisers. You should expect some good advertisers have a good CTR, but are simply out-bid by big companies with big marketing budgets. So those good advertisers are naturally pushed lower down (but are still good enough to be on the first page).
Consequently (and especially for highly competitive niches) you’ll find that the target CTR applies for pretty much all positions on the first page.
What is the CTR target for the second and later search results?
I play to win, so don’t waste my time on subsequent pages. If I’m not on the first page, and cannot bid higher, then I find another keyword that I can afford.
If you like being on subsequent pages, you’ll have to figure out the target yourself using the method I’ve described above.
I’ve been averaging position 5.6 and all of a sudden I’m at 6.8. What happened?
There are many advertisers on Google, and it could have been that a new one just started bidding on your keyword.
It is important to make sure you have a “statistically significant” sample before analyzing and making adjustments to your campaign. I’ve often found that things like aCPC and Average Ad Position can vary from day to day, but things will be “correct” if you have a large enough sample size.
Ultimately if the new advertising has “staying power” (i.e. if you’ve got a valid sample size, and indeed your position has been lowered), then you can either:
I actually find that being “outbid” (but if I remain on the first page) to be a good thing. I’m now having my same high CTR (assuming you can maintain the CTR) at a lower ad position. This will allow me to score better, and actually more quickly recover my lost position without needing to bid higher. But your mileage may vary
My aCPC and Average Ad Position has both increased! Why?
Most of the time, you’ll find that Google lower your aCPC.
Sometimes, Google makes the decision that your good CTR deserves an even better ad position! But unforutnately in giving you a higher ad position, it requires a (slightly) higher bid. While a good thing, some campaigns might be thrown off (because the higher position may get you even more clicks and with the higher price per click you might hit your budget limit sooner). You can choose to do 2 things in this case:
Great post Ian. Always good stuff from you.
[...] two campaigns using PPC. Initially i was afraid of losing money. But i got an article about “The importance of Adwords CTR“. Also now i am working for a nice guy who is going to pay me well (this is my first month [...]
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