In traditional advertising, visibility was always the key performance metric, and it was measured as the number of impressions an ad would generate. These impressions were printed copies of the ad in a magazine or a newspaper. This notion of impressions has been carried into advertising in the digital age.

But in today's business advertising, ads are interactive. In digital advertising, viewers can interact with ads and click on them. This interactivity has introduced a new metric, the click-through rate (CTR), the rate at which users click on an ad.

Overview: What is click-through rate?

The click-through rate formula is a simple calculation of the number of clicks on an ad, a piece of content, or an email, divided by the number of times the element was shown. In digital advertising, the CTR is thus the number of clicks on an ad divided by the number of impressions of the ad.

The definition of the click-through rate is simply the number of clicks divided by the number of impressions expressed as a percentage. Image source: Author

The meaning of CTR can vary depending on the context in which it's used. It's applied to other types of content than ads. In an email that can contain several links, the click-through rate will be the total number of clicks from that email divided by the number of emails sent.

Click-through rates are also an important signal search engines use to evaluate the quality of a link they've indexed. They analyze the CTR for links they have ranked on the search results page to see which pages have higher click-through rates. This is an indication of quality and, from a search engine optimization (SEO) perspective, this is believed to help sites maintain and improve their ranking.

In search engine advertising, an ad's CTR is one of the most important components in Google's Quality Score, a mechanism that assesses ad quality. Higher quality ads result in lower ad prices and better positions.

What’s a good click-through rate?

The theoretical maximum CTR is 100%, but no digital activity ever comes close to that rate. Brand-related search queries can reach 15%. This is when a user searches for your brand in a search engine and clicks on an ad for it.

In email marketing, an outstanding CTR can reach 7%-10%. This is the aggregate CTR for all links if there is more than one link in the email, and it only applies to qualified email lists such as newsletters to which users have subscribed.

For search advertising other than brand-related queries, an outstanding CTR is 5%, but most click-through rates will be much lower. Average CTRs are around 2% but vary by country, industry, and advertiser.

Most click-through rates for digital advertising are actually under 1%, and the more your move into display ads, the lower it becomes. In display advertising, rates below 0.1% are not unusual.

How is CTR different from CPA?

Click-through rate is a key metric for measuring performance when a user is exposed to a message or an ad. The higher the CTR, the better the communication and performance. But CTR is no guarantee of increased sales.

To measure the business performance of your communication, you can use a metric that appears a little later in the user journey: conversion rate. Conversion rate is defined as the number of conversions divided by the number of visitors.

But to manage advertising budgets, it's more common to use the CPA metric: cost per acquisition, because it includes the cost dimension. CPA is calculated as the media spend required to generate one conversion.

How is CTR different from engagement rates?

CTR is an interactivity measure. In a sense, it can be considered a performance measure, but it's not the only relevant metric for measuring interactivity and quality.

In social media advertising, the click is not the only form of interactivity. Users on social media also engage with communication with likes, shares, and comments. Engagement rate is an aggregate measure taking all these actions into account and is therefore a more complete measure of performance than CTR.

5 strategies to optimize your click-through rate

When you invest time and resources in advertising, constantly optimize your communication elements to maximize outcome. Let's look at some ways you can optimize your click-through rate.

1. Improve your audience qualification

The more qualified your audience is in relation to your ad, the higher the click-through rate will be. More tightly defining your audience can therefore be a great way to improve your return on ad spend.

2. Target the right times of day

Your audience may be online and open to your message at specific times of the day. You can find those times of the day by measuring CTR per hour. Tuning your campaign down at low performing times of the day can improve outcome.

3. Improve your messaging

The better the message, the higher the impact. Reviewing and tweaking your ads may produce better results.

4. Improve your calls to action

You'll need an effective call to action (CTA) for an ad to be clicked. Ads inviting users to "click here" generally achieve CTRs higher than ads without calls to action.

5. Multiply the number of ad variations

Best practices dictate you make several versions of your ads and concentrate on those returning the highest CTR. You can test unlimited iterations.

Newer ad formats in Google Ads are based on automatic variations based on title and descriptions you enter. Image source: Author

Source: ads.google.com.

3 best practices for analyzing your click-through rate

Always keep an eye on CTRs in your digital marketing activities, but don't come to any hasty conclusions. Let's look at a few best practices for analyzing CTR below.

1. Look at significant data volumes

A CTR based on limited impressions isn't meaningful. Always look at significant volumes of data before you modify any elements of your communication. Patience is in order.

2. Select consistent time periods

A good way to analyze CTR is to compare one time period with a reference period. When you do this, it's important to use consistent time periods such as full days or full weeks. Users can behave differently on different days or at different times of the day.

3. Compare apples to apples

A paid search campaign isn't comparable to a display campaign, and you can't extract meaningful information when comparing their click-through rates. When comparing CTRs, look at the same campaign for different time periods or similar campaigns within the same communication channel and in the same industry.

Click-through rate is about relevance

Users see thousands of messages and ads each day. They click on the links of some to learn more or engage with the advertiser. The click-through rate measures what proportion of users engage.

As a digital marketer, use CTR measurement to improve the quality of your messages and qualify the audiences you target to make your communication as relevant as possible.