Suppose you wanted to run a marketing campaign on the Google Display Network. You upload a set of image ads, specify your targeting options, and let Google serve your ads on publishers which Google believes are relevant to your targeting options.
Let’s say you’re willing to pay $2.00 per click. Your ads receive 10,000 impressions and achieve a click through rate (CTR) of 0.03%, which very typical for a traditional display campaign. This means you, the advertiser, will receive 10,000 impressions x 0.03% CTR = 3 clicks.
Since publishers receive 68% of revenue, total revenue from the 10,000 impressions is split as follows:
The revenue received by Google and the publisher is highlighted in the red and green shaded areas below.
Now let’s see what happens if the advertiser were to achieve a 10x higher CTR of 0.3% with more engaging mage ads and more relevant targeting settings. Let’s also assume that the advertiser is now willing to pay only $0.50 per click – only a quarter that of the previous example.
Again, your ads receive 10,000 impressions. However, with the higher CTR of 0.3%, you, the advertiser, will receive 10,000 impressions x 0.3% CTR = 30 clicks. Total revenue from the 10,000 impressions would be split as follows:
Again, the revenue received by Google and the publisher is highlighted in the red and green shaded areas below.
Notice how the shaded areas for the publisher and Google have both increased!
Even though the cost per click has fallen from $2.00 to $0.50, the publisher and Google are now both much better off.
For the same 10,000 impressions:
And since the advertiser is now only paying $0.50 per click compared to $2.00 per click, each visitor to their website is only costing them a fraction of the price.
Knowing that ads which receive a higher CTR will generate more revenue for Google and the publisher for every 10,000 impressions, Google will show ads which receive a higher CTR more often.
Even if the advertiser is willing to pay less per click – as we have seen in the example above – as long as the revenue generated per 10,000 impressions is higher than the next advertiser, Google will favour your ads and give you more impressions.
In fact, as long as your CPC bid is at least $0.20 (using the same example), Google and the publisher will generate more revenue with a CTR of 0.3% than a 10x higher CPC bid of $2.00 and a measly CTR of 0.03%.
Essentially, the higher the CTR your ads can achieve, the more impressions your ads will be eligible to receive, and the lower the cost per click price you will need to pay for each visitor to your website.
Since a high CTR is so important, below are some tips to help you achieve a high CTR: