Report: Little Correlation Between CTR and Conversion Rates

A new industry report says that click rates have little value as indicators for return on investment (ROI) optimization because their correlation to conversion rates is so low.

The report from AdKnowledge says that only 14.3 percent of the time is the ad with the highest click rate in a campaign also the ad with the highest conversion rate. (Conversion rate is considered to be the rate at which people are converted from a view of an ad on the Web to a desirable action on an advertiser’s site, like a sale or registration).

“There has been a lot of talk lately about declining click rates,” said AdKnowledge Vice President Steve Findley. “This new data proves that Web advertisers who are just looking at click rates are missing the bigger picture.”

“The Web is fast becoming a more sophisticated advertising medium. Because it’s so measurable, data mining will be increasingly used by smart marketers to optimize current campaigns and point the way towards more efficient campaigns in the future.”

Other data from the quarterly report shows that when selecting the best Web sites for a campaign based on click rates and not conversion rates, there is a 50/50 chance of choosing incorrectly.

The report shows online advertising rates continued to decline in the second quarter. In the first quarter, average CPM cost was $34.96, while the average CPM cost in the second quarter was $34.23.

AdKnowledge’s Online Advertising Report is a compilation of Web advertising statistics analyzed by AdKnowledge eAnalytics, which provides insight into online brand awareness and purchase behavior.