The Ugly Truth About Click-Through Rate

In the 1990s, the Internet banner ad was a marketing revolution. We could not only measure the size of the audience that saw our ads but we had a real-time (or near real-time) feedback mechanism in the click-through rate (CTR).

We loved clicks; the click was one of the cornerstones of the whole industry.

We have grown up as an industry a bit since the 1990s. We are now interested in unique users and not just impression numbers and we are far less jejune about the measurability of online ads. However, we are still hooked on CTR. In a world where an acceptable ratio is 1 click in 1,000 impressions, can we even call the banner ad a direct response vehicle anymore? The question begs to be asked that if people are not clicking, are these ads having any effect?

I recently presented some research at SES in Hong Kong that was conducted in Europe by comScore in collaboration with the ad network where I work. It suggested that the direct result of banner advertising was an increase in website visits for the advertiser and an increase in branded search queries for the advertiser’s brand.

If I take the fairly unscientific approach of looking at my own behaviour, I click on banners (for more than professional curiosity) but even more often, I will make a mental note to have look at a website later.

This research suggests that I am not alone. It seems many (most) other people also make a mental note to visit the site later or search for the brand or offer at a time that suits them.

Another key issue this research raises is that 84 percent of Web users never click on banners. Of the 16 percent of Web users that do click on banner ads, the top 4 percent produce 67 percent of all clicks. Simply put, most banner clicking activity comes from 4 percent of the online population and the vast majority of Web users never click on banners.

Ouch!

We are either holding ourselves to or being held to a performance metric that reflects our ability to elicit a response from only 4 to 16 percent of online users. While at the same time we ignore any performance metrics for 84 percent of the online audience. This just can’t be right!

What may be of more concern is the practice of campaign optimisation based on the CTR. A common practice is to optimise banner campaigns to sites or banners that are giving the highest CTR. If the comScore/FOX research is correct then we are targeting our ads to appeal to a small minority that may not be too choosey as to what they click on. At best we are orienting our campaigns to a loud minority.

ComScore has run similar research in the U.S. with similar results. If this is happening in the world’s other main markets we can safely assume that something similar is happening in Asia.

Making a change is not so simple. A little knowledge is a dangerous thing and sadly a little knowledge of online advertising is pretty common. It takes bravery to go into a client and say that we will now disregard the main currency we have been basing their investments on for the past decade or more.

One solution might be to bring other things to the table for reporting that are more compelling. Social media listening has a certain ‘shock and awe’ value and combined with other information such as organic search data or the volume of cookied visitors on the site from the ad campaign. We may start weaning clients off CTR.

We must start educating the market about the real uses of the banner ad. What is it, what it does, and why we should invest money in them as a part of our campaigns.

A banner ad, when properly applied, can lay a controlled frequency on a targeted audience at a low cost to raise awareness and drive desire for the product. With main performance indicators being the increase in cookied visitors to the website and an increase in branded search queries.

Call me a dreamer, but I would like to put the CTR to rest for good.

This column was originally published on Oct. 19, 2010 on ClickZ.Asia.