Note: This post is all about pay per click advertising on search engines. If you are very new to this subject, you will find our beginners’ guides a great place to start before reading this post:

Part 1 – Concept of search engine pay per click (PPC) advertising
Part 2 – Research and choose your keywords in detail
Part 3 – Write your PPC adverts
Part 4 – Analyse PPC performance
Part 5 – How to increase your PPC ad’s conversion

This post is going to do exactly what it says on the tin; comment on the relationship between your pay per click (PPC) ad positions and your advert’s click through rate (CTR)

Your ad CTR is calculated by dividing the number of times your ad is clicked on by the number of times it is displayed as part of a search result. It’s then multiplied by 100 to give your CTR as a percentage.

CTR% = (number of clicks / number of impressions) x 100

The question is, what is the point of having an ad placed in position 4 that costs 30p per click, when you could be in position 6 for 22p per click, saving you 27% per click? After all, positions 4 and 6 are virtually next to each other, so aren’t people bound to see the ad at position 6 if they can see the ad at position 4, and be just as likely to click on it?

Well no, unfortunately, that is not the case.

I want to share some of our own data with you to highlight how closely the two are tied, and how moving just one ad position (up or down) can have noticeable effects on your traffic.

This graph shows average ad position and click through rate data for one of our ad groups from early last year. The blue line is our ad position (right axis) and the pink line is the CTR% (left axis)

Note: The actual percentage figures have been changed for confidentiality’s sake; however, the proportions remain the same. Click the graph to see it larger.

CTR vs Position graph

What jumps out straight away is how they rise and fall in tandem, and also how only a small change in the average ad position can have a big effect in the CTR%. For example, if we look at day one we can see the CTR is at 4.25% and the average ad position is around about 4.

When we decreased the position to 5, the CTR fell to 3.75% – a drop of 12%. For the sake of keeping it simple, let’s say we are dealing with 10,000 impressions per day. That’s 500 fewer clicks per day, just from a drop of one place. Why does this happen?

If you think of the way you look a search engine results page (SERP), how often do you carefully consider each and every of the 20 results (10 organic and 10 paid) on a page? People just don’t interact with SERPs in this way; instead, they scan the page quickly, almost foraging for related information and then focusing on it (e.g. the keyword in the ad being bold). If they are happy it fulfils what they are looking for, they click on it. All this happens in a matter of seconds (sometimes less).

Research conducted by Enquiro in to how people’s eyes interact with a SERP found these common patterns:

Heatmap for Yahoo, Google and Live search

One of the findings was that the paid advertising placements on the right of the SERP are very rarely looked at – let alone clicked on – and the lower the ad is placed, the less it is looked at, and therefore the less it is clicked on.

Understanding this can go along way to helping you manage your PPC ads, in terms of bid management and the analysis of your results. For instance: why have clicks and sales fallen even though impressions have remained the same? It might be because your ads have dropped a place or two due to competitors increasing their bids.

Need a helping hand? Find out more about our PPC management services and see why you should give it a try.

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2 Responses

  • Affiliate Newbie Guide

    Interesting graphs.
    There are some authorities that claim that the best performing ads are in position 6. I think if your ad is pointing to an opt in page you want a higher ad position. However if you are pointing to an affiliate link, a higher click through rate does not necessarily mean great conversions.

    February 8, 2008 at 1:52 pm
  • Coffeemate49

    Rather than just increase your bid to gain a higher advert position and hence a higher CTR, it is better to:
    (1) Work on search term to advert to landing page alignment to gain a higher quality score and hence higher position for the same bid. N.B. This may even require some restructuring of your campaigns / adgroups. An added advantage of this approach is that it improves visitor response to the landing page.
    (2) Continuously split test adverts to gain a higher CTR.

    I also agree with Affiliate Newbie’s comment about conversions. Overall, what you want to maximise is return from investment (ROI) – not CTR in isolation. The ideal average position of an advert in terms of ROI varies from keyword to keyword. I believe the key here is to always link your Adwords to Google Analytics on the website and measure results end to end: Living Streams always runs Adword for its clients using this approach.

    October 16, 2009 at 11:25 am