Oct, 8th, 2010

CTR of top paid ad positions revealed

Did you know that the top position in the paid search results can increase your click-through and conversion volumes exponentially? This report draws on intelligence from over 1,000,000 Google searches across 10 large search engine marketing campaigns to shed light on the relationship between ad position and click-through rate.

Why Ad Position Matters

It’s common knowledge that ads appearing in the highest paid positions usually experience a higher click-through rate (CTR). However, surprisingly little research has been published on this subject. Few people know how fast CTR falls for ads that appear lower down the page, or even what is the distribution of CTR across ads beyond their own campaigns.

ctr-by-ad-position-v1

In an industry first, First Rate has conducted research using the paid search accounts of ten of its clients. Our research revealed that ads showing in position #1 experienced an average CTR of 17%. In other words, an advertiser can expect to attract 17 clicks for every 100 impressions when his ad appears in the top spot. Ads that showed in position #2 also drew significant attention, with an average 13% CTR recorded over the period. Interestingly, click-through rates flattened across positions 4 to 7, before tailing off.

This has produced some interesting insights:

  • If an advertiser is appearing in position #4, then can they reduce their bids and maintain their CTR even at a lower paid position? Our research suggests this is be possible;
  • If the advertiser is appearing in position #3, then how big an increase in CTR could they secure by lifting their paid ad position? Our research suggests ads in position #1 experience more than double the CTR of ads in position #3.

The Long-tail Generates Higher CTR

Ad position is only one the factors that influences click-through rates. Other factors include the relevance of your ad to the search query, the number of competing ads, and the quality of organic search results.

Our research shows that long-tail search queries experience substantially higher click-through rates. This result holds true across all paid ad positions. For example, ads appearing in position #1 can record an average CTR of 32% for long-tail searches featuring 4 words and more. Conversely, the same ad can attract up to 12% CTR for short-tail searches featuring up to 3 words.

ctr-by-ad-position-v2

Short-Tail vs Long-Tail Searches

Short-tail searches on non-brand keywords typically occur in the early stages of the buying cycle, when people are driven by informational needs. Longer tail searches arise further down the buying cycle, when people are likely to pay more attention to ads and convert.

First Rate research indicates that 3-word searches compose 30% of all searches. Long-tail queries featuring 4 words or more account for 58% of all searches.

short-tail-vs-long-tail-searches

Interestingly, few marketing managers know how to successfully capture long-tail searches through paid search campaigns, preferring instead to bid on short-tail, high-volume phrases. Based on this research, they would do well to expand their search campaigns beyond the short-tail, with a campaign and ad group structure that capture medium- to long-tail searches.

How to Reach the #1 Paid Spot

Appearing in the top spots above search results can have a transformational impact on your Internet marketing campaigns. If your focus is on brand-building, a top position will help grow your impression share and increase brand awareness.

If, however, your focus is on conversions, a top position will maximize traffic to your landing page and grow your bottom line, as long as you have struck a balance between your cost per acquisition and revenue per conversion. Importantly, if the incremental cost of bidding to the top ad position is not offset by a higher conversion rate, you could end up blowing out your CPA, making the achievement a hollow one.

Advertisers often ask us how they can target the top placements above search results. For any given search, AdWords opens these positions to the highest ranking ads only if they meet a certain Quality Score and CPC bid threshold. Reaching out to long-tail queries with compelling ad text is one of the ways you could get there.

Study methodology

This study draws on actual search queries across 10 Google AdWords accounts managed by First Rate. Campaigns selected included advertisers from a broad range of categories, including insurance, banking and retail. Together, these campaigns accrued 1,299,969 impressions and 133,418 clicks on the Google Search Network between July 1st 2010 and September 30th 2010. Campaigns were primarily based in Australia. Importantly, brand searches for First Rate clients were excluded from the results, to remove the natural bias between brand searches and click-through rates.

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