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Since the beginning of search engine marketing, search engines have been training their users to focus on achieving a higher click through rate (CTR). The search engines say that an ad with a higher CTR is more 'relevant' and more 'compelling' to searchers, thus it will 'perform' better. Read below to see exactly how the Top 3 search engines speak to this:
MSN: The relevance of your ads affects their performance. Making your ads highly relevant is an inexpensive way to improve their position and increase their CTR.
Yahoo: An ad's quality index is primarily determined by its CTR. To improve your quality index, focus on making your ads as compelling as possible, so that users will be more likely to click on them, giving you the best possible CTR.
Google: Over time, our system determines which ad is performing better based on higher historic CTRs and Quality Scores compared to other ads within the ad group. Based on this data, we'll show your higher performing ads more often.
The search engines are not saying anything wrong here, however, they define performance differently than most search engine marketers would. The search engines equate performance with CTRs, whereas a search engine marketer would define performance as ROI. So, that brings up the question, "Do ads with higher CTRs earn a better ROI?"
At ClearSaleing, we decided to find out. To answer this question, we used our advertising tracking technology across several clients in different industries to measure the performance of an ad text in terms of total profit, total revenue, conversion rate, profit/order, revenue/order, profit/click, revenue/click and CTR. For the purpose of this test, we used Google since they are the only search engine that provides the option to rotate the distribution of your ad text, which makes sure each ad runs an equal number of times.
We allowed each ad text to run for a long enough period to gather a statistically sound sample of impressions before we began to measure its performance. Of all the metrics ClearSaleing captured, we focused our attention on the most important metric to our client's search marketing; profit. At the end of the day, we want to run the ad texts that generate the most total profit for our clients, regardless of what the other metrics might tell us to do.
After the testing period was complete, we analyzed the data. We stack-ranked each ad text within each ad group according to several metrics, including CTR, profit, etc. We found that there is no statistical evidence that proves the ad text with the highest CTR is the ad text that produces the most profit. In many cases, we found the most profitable ad text to be the ad with the
lowest CTR. The results of the study led us to conclude across all clients that judging ad text performance based on CTR is not an indicator of an ads true performance, as is common belief in search marketing.
Our study did not try to answer the question, "How could ads with higher CTRs produce less profit than ads with lower CTRs?" To answer this, we would need to employ a consumer behavior specialist and even then, our answers would be subjective at best. Nonetheless, we did try to put some sense around how the language we use in ads affects the ad's performance. Here is an example of 3 different ad texts used for a client in the musical instrument space and our thoughts on how the language dictated the ad's performance (note: we changed the client's name to hide their identity):
Ad A: According to the search engines, this ad would be our most "compelling" because it had the highest CTR. This ad had the broadest focus and an attractive call-to-action without any conditions. We found that we sold a lot of low end accessories from this ad, with most of the orders coming in at under $100. This ad also had the lowest average order size of the three. Because of this ad's focus on low price and free shipping, it seemed to bring in the most cost-conscious consumers.
Ad B: This ad was more targeted by focusing on the two top-selling guitar manufacturers. These two manufacturers sell some of the more expensive guitars in the market. Therefore, users that clicked on this ad might be more serious musicians and, more importantly, looking to spend more money because they want guitars instead of accessories. The free shipping offer is attractive, but unlike the first ad, it got the buyer thinking bigger purchase. We did sell more guitars from this ad text than we did in ad A.
Ad C: This ad had a definitive qualifier. It basically told searchers that if what you want is not over $99, you are probably better off shopping elsewhere. Therefore, the people that did click this ad were more serious buyers, which was proven by the fact that the average order value was higher than the other ads, as was the conversion rate. Overall, this was the most profitable ad even though it had the lowest CTR and least "compelling" message.
For each client that was involved in this study and each of our clients since, we have turned our focus from trying to achieve higher CTRs to trying to earn more profit from each ad text, and in the process, we have often found the ad text we selected is not always the ad text with the highest CTR, therefore, in essence, we have lowered our client's CTRs on average to achieve better performance in terms of the only metric that matters; profit.
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