Google is right; click-through and conversion rates kinda don’t matter

Last month I wrote extensively on the seeming lack of meaningful click-through rates (CTR) growth following the implementation of Google expanded text ads (ETA), despite Google’s own assorted case studies showing meaningfully higher CTR with expanded text ads compared to the previous long-standing text format.

As mentioned in my previous post, we’re now on to a whole new world of text ads with Google’s new Responsive Search Ads (RSA), which gives Google the ability to mix and match headlines and descriptions in creating the final ad shown to users and gives advertisers more characters to work with in crafting their message.

Just last week, Search Engine Land contributor and Google Director of Performance Ads Marketing Matt Lawson provided best practice recommendations for these new ad units to help advertisers make the most of the new format. There’s a lot of good advice in there straight from the search giant’s mouth, but one bit, in particular, piqued my interest:

And here’s a final reminder about testing: Don’t overly fixate on metrics like click-through rate (CTR) and conversion rate. These new ad formats are about driving more impressions, clicks and conversions. There are all sorts of instances where you might end up serving impressions in a low CTR placement that you never would have qualified for before. A high CTR isn’t the end goal; it should be more sales for your business.

It seems Google has learned from the ETA episode not to sell advertisers on higher CTR, and indeed has built its RSA proposition around the idea of incremental clicks and sales, which, of course, only Google can measure, since there’s no way for advertisers to quantify ad placements that are off limits to ETAs for whatever reason. That doesn’t negate the failure of ETAs to live up to Google’s expectations with the metric of its own choosing at the time of announcement (CTR), but it is onto something!

Click-through rates sort of, kinda don’t matter, and neither does conversion rate. There are a number of reasons why.

Why you shouldn’t sweat CTR too much

Countless studies regularly put out CTR benchmarks and compare metrics across different platforms and ad formats, so it must really matter right?

Eh…

Honestly, most of those benchmarks aren’t very useful. The main reason is that such studies are rarely conducted rigorously enough to account for major variables like device, brand vs. non-brand, google.com vs. search partners, changing SERP layout and other important considerations. Directional same-site trends can be instructive for how things should be moving over time, but analyzing such trends well requires accounting for all of the same variables and typically isn’t very actionable.

Even when looking at a rigorous study conducted for a single advertiser testing different ads, CTR isn’t the final metric by which a winner should be chosen.

Could I get a much higher CTR by promising a bunch of free stuff in my ad? Probably.

Will the additional ad traffic lead to greater value for my business? Maybe, but assessing that would require a whole lot more than a statistically significant difference in CTR.

CTR is the product of both how effective your ad is at attracting clicks and your efficiency targets, which are often returned on ad spend or cost per acquisition/lead for many advertisers. When it comes to the latter, an advertiser can only bid so much for a particular keyword and remain profitable. Where that ceiling falls within an auction plays a large part in determining the advertiser’s position and ensuing CTR.

But a higher bid doesn’t necessarily mean higher CTR, as bidding more for a keyword might enter the keyword into more auctions in a position lower on the page. CTR is an average, so with lower positions in the mix, the CTR might look worse with a higher bid. This is comparable to Matt’s explanation of how ads might occupy new placements with RSAs they wouldn’t have entered with ETAs, and that can have counterintuitive effects on metrics like CTR.

CTR can still be effective as a diagnostic tool for identifying more appealing ad copy or to understand when an ad has become more or less attractive relative to the ads it’s competing against over time. That said, it’s not a key performance indicator (KPI) advertisers should be chasing.

The same can be said of conversion rate.

Conversion rate doesn’t matter? Now you’re just making stuff up

The idea that it doesn’t matter how often clicks actually convert sounds pretty… controversial. How can it not matter the clicks I’m paying cold hard cash for end up (or don’t end up) driving conversions?

The answer is that any conversion rate can be acceptable, so long as the price paid for the clicks results in an effective cost per conversion. For example, my previous research showed paid search clicks from the search partner network convert at a much lower rate than traffic from Google.com, but that search partner cost per click (CPC) is inherently lower. For some segments, the difference in conversion rate and CPC were almost the exact same, such as with mobile Google Shopping ads.

Thus, targeting the search partner network does reduce aggregate conversion rate, but it also reduces CPC in most cases, as there appears to be a discount baked in for the disparity in traffic value. Allowing ads to show on the search partner network thus provides a fairly efficient way of incrementally increasing conversions.

When it comes to RSAs, it’s plausible that new ad placements might produce clicks which are less likely to convert but which come at a lower cost, in which case Matt Lawson is correct in saying advertisers shouldn’t stress conversion rate too much.

However, while incremental impressions, clicks and conversions are important, at the end of the day the cost of acquiring them determines whether incremental gains are profitable or not. Incremental spend and the corresponding cost of additional conversions are incredibly important to advertisers, to say nothing of their importance to Google.

Still, the thrust of the argument that conversion rate shouldn’t be advertisers’ main goal does hold water. Much like CTR, conversion rate can be used to identify superior landing pages and/or ad copy but isn’t the be-all and end-all.

So click-through and conversion rates really don’t matter?

In the proper context, it is true advertisers shouldn’t worry too much about CTR and conversion rate.

Should advertisers try to boost CTR and conversion rate? Absolutely, but only if it leads to a better bottom line for the business.

Should advertisers try to incrementally boost the number of impressions, clicks and conversions their paid search programs are driving?

Absolutely, but only if the price is right.


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