There’s quite a lot of buzz in the industry at the moment about the obsession with the click through rate and maybe the death of it.
For many years, our industry has focussed on this metric as a measure of a campaign’s effectiveness. It’s such an easy metric to track! However, as we’ve always believed, it’s isn’t everything.
“Used since the early days of online advertising as an indicator of the effectiveness of an ad, the click originated simply because it could be measured.
But not everything that can be measured matters.
In fact, the use of clicks on display ads as a meaningful metric sets the internet up for failure as a branding medium. Doubleclick reports that click rates on display ads today have fallen to approximately 0.1%, an unfortunate reality that has created serious doubts about the value of online advertising in the minds of advertisers that have experimented with the internet as a branding medium.”
Gian M. Fulgoni, co-founder of comScore
Often, when we take a look at the reports for a campaign, we see that the most effective ads (e.g. ads that have given the most, or most profitable, sales) don’t always correlate with the ads that have the highest click through rate.
It’s simple to look at this for websites where you can track to a direct sale, however it’s not so simple for us to see this for campaigns designed to uplift brand metrics.
Luckily, both comScore and Nielsen are looking at this area and are producing some good research.
comScore’s study into Click Through Rates
“In a white paper ‘Whither the Click’ (published in the June issue of the Journal of Advertising Research), we summarized the hundreds of studies we’ve conducted using the comScore panel and comparing the behavior of panelists exposed to brand online display ads with the behavior of those who did not see the ads.
Even in the face of negligible click rates, time and again we observed statistically significant lifts among the ad-exposed consumers in the number of visits to the advertised brand’s web site, the number of trademark search queries, and the sales of the advertised brand, both online and offline.”
Gian M. Fulgoni, co-founder of comScore
Nielsen’s Study into Click Through Rates & ROI
Nielsen have done lots of work (particularly in FMCG and retail), looking at the effect that online display advertising has on offline purchases. Looking at more than 300 campaigns over a span of about 5 years, they have found that the average ROI is a positive 157 percent.
Then, to measure the relationship between click through rates and ROI, they ran an analysis across 200 of those campaigns.
“If there were a relationship between the two metrics, we would expect to see a grouping of red dots with an up/rightward inclination (the more clicks, the better the ROI).
Instead, what we see is something more like a blob or a swarm. For you quantitative thinkers, the correlation between the two metrics is a negative .07, meaning that there is no relationship whatsoever between the two metrics. More to the point: across the campaigns measured, click through rate was in no way predictive of a campaigns’ overall effectiveness.
Beyond the obvious finding that advertisers should not be overly focused on click through rates, the big idea here is that advertisers should be including online display advertising in their overall marketing mix, increasingly taking advantage of flash/video ad units to reach the consumer, without the hope that the person exposed to the ad will be one of the few that actually click on ads.”
Source: The Nielsen Company
At swamp, we think that in order to move away from the click, the cost of measuring brand metrics needs to come down. It needs to be quick, cheap and easy for us to track. I hope Millward Brown’s Dynamic Logic, MetrixLabs and the others pay attention.
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I agree CTR is a poor metric to measure a campaign’s effectiveness. However CTR does currently play an important role in PPC to insure you have a high quality score. A poor quality score means paying more per click higher costs and less ROI.
Click through rate is a fairly brute force, old world way of looking at advertising.
I’d recommend picking up “Trust Agents” by @ChrisBrogan
He explains pretty well, how the much more valuable commodity is the one of consumer trust for your product or brand. Whilst this is much harder to measure, with the rise of social media, the reward, and the penalties of really responding and interacting with your customer have become much more important.
To find out what your customers think of a product or even advertisement, all you have to do these days is ask. If they like it, they will respond in their millions.
This is why Microsoft have got into blogging. They’re an old media company, who are smart enough to move with the times, a little later than everyone else. Yet, when Microsoft move, you know it’s time for IBM and then the domino effect of FTSE 100 / Dow Jones companies to invest in social media. It’s not a fad, it’s a window into the thoughts of your customer.
There is a lot out there on the new, more complex ways to model ROI.