Click-through rate or CTR is often used to describe the advertising performance on a publisher’s site. CTR for an ad is defined as the number of clicks on an ad divided by the number of times the ad is shown (impressions), expressed as a percentage. If the ad sales team for a publisher claims a million monthly unique visitors with 4 million page views and a CTR of 0.2% (or 8,000 click-throughs), the buyer might think those click-throughs are all distributed across the million unique users to yield 8,000 target audience members. The buyer and the seller are wrong.
Here’s the problem: CTR doesn’t take into account audience composition. To demonstrate the weakness of CTR to communicate performance, let’s assume a single advertiser buys the entire inventory for the month. The advertiser bought all four million page views from the one million unique to have an intended 8,000 target audience members click-through to the advertiser’s site. What skews CTR to be a poor metric of performance? Engagement.
· As shown by Scout Analytics research, the advertiser’s target, the loyal audience, is usually 20-30% of the visitors who generate 70-80% of the page views. This means that the available audience for the advertiser is really 200-300,000 visitors not 1,000,000. The remaining 700,000 audience members generated from search are statistically irrelevant to the advertiser.
· Scout Analytics research also finds that CTR varies by engagement with loyal audience members delivering the majority of the click-throughs, but for odd reasons, irrelevant fly-bys still generate click-throughs. These 700,000 irrelevant fly-bys typically have a much lower CTR. For this example, let’s assume their CTR at half the CTR of a loyal audience.
· Finally, Scout Analytics research shows that some audience members are more “clicky” than others. The clicky audience not only frequently generates click-throughs but often on the same ad distorting the CTR further. This example assumes 10% of the loyal audience is 5X more clicky than the average loyal audience member.
After solving a couple of simultaneous equations, the CTR of the average loyal audience is 0.177%; the clicky audience’s CTR is 0.885%; and the fly-by CTR is 0.089%. Rather than getting 8,000 target audience members to click through, the advertiser would actually only get 4,956, or 3,044 short of the expected 8,000 – a full 38% short.
A more relevant metric would be audience conversion rate (ACR) or the number of unique audience members that clicked through divided by the total number of loyal audience members. Looking at the above example, the publisher is actually producing 1.65% ACR (i.e., 4,956/300,000). Not only is the 1.65% a more representative of publisher and media performance, it is also has a better value proposition to the advertiser and makes ad sales more productive.