Thoughts on interactive advertising and digital marketing.


Clickthrough rate - A flawed metric

August 23, 2004

What is Click-through Rate?

Click-through (CTR) is simply a measure of the number of clicks received by an ad divided by the number of times that ad was displayed. Many people in the interactive advertising industry gauge the success of campaigns using this measure alone, often incorrectly. Let me explain why this is so.

The number of clicks received by a display banner ad is a function of many factors. Some of them are:

1. Relevance - The ad has to be relevant to the target audience. For example, an ad for a sale happening in New York wouldn't be interesting for a person in New Delhi. In addition to geography, relevance can be demographic, cultural or even attitudinal.

2. The product / brand - A prospective banking customer would be more likely to click on a Citibank ad rather than a North Coast Liberal bank ad, simply because she will be more knowledgeable about the former. As such, display campaigns of strong brands perform much better than relatively unknown competitors because of the brand recall, loyalty and other brand preferences.

3. The offer - If the ad communicates an offer that has higher perceived value to the prospect, the response rate will go up proportionately. This means response to a vanilla ad will be lesser than one with a promotion offer, as the prospect is incentivized for taking the action to click on the ad.

4. The message / creative - The offer has to be communicated briefly and clearly to the prospect, in the limited time that the banner registers in the mind of the reader. Long-winding, slow animations usually perform poorly because the reader's attention might have shifted elsewhere.

Click-through is but one of the many metrics that can be used to measure online ad campaigns, but it is not the only one. Display campaigns have the potential to be more than mere direct response mechanisms, and it is high time we started treating it as such.

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