In 1994, when the first Web ad appeared, (it was a single panel display ad for AT&T which appeared on HotWired.com) a revolution in advertising began.
Advertisers were quick to recognize that they could effectively drive traffic to their web sites by placing these banner "buttons" on other publishers' sites. They also quickly realized that by counting the number of times that an ad was clicked and dividing it by the number of times that the ad was displayed, a nice solid metric could be generated to measure campaign effectiveness - the click through rate (CTR).
The initial CTR for display ads was often remarkable, reaching as high as 30 percent in the very early days of online advertising. However, after the novelty for the new ad format wore off, CTR declined dramatically to eventually hover where it is today -an average of only 0.3 percent.
During the past 14 years, a large number of online ad models have joined the advertising mix. While many of these new technologies give advertisers ways to engage consumers through interactive rich media, search engine results, video based advertising and a wide array of online display ad formats, CTR is often still the benchmark metric that advertisers use to determine campaign effectiveness. It is, after all, a metric that can be used to compare interaction by a consumer across a wide variety of ad formats.
While driving traffic to a web site can be a valuable indicator of campaign performance, it doesn't offer the "why" behind the metric. For example, if a campaign gets a higher than average CTR, to what is this success attributed? Is it the type or quality of the offer that drew interest? What about the design? How about the format itself? Was it great media placement? Was it targeting? Or, perhaps, is it truly a combination of many variables and, subsequently, also only one variable in the measurement of campaign performance?
Measuring click through rate (CTR) to determine a campaign's effectiveness is a little like describing an elephant as "grey." While true, this single metric only offers a small part of a much larger picture.
Consider the traditional retail model for a moment: to be successful a store needs to generate foot traffic. However, the real indicator of success has less to do with the number of people who visit the store and more about the number of visitors who make a purchase (and what size of purchase) during that visit. In essence, a store that has thousands of visitors a day without buying is certainly less effective than a store that has only a single visitor who does make purchases.
Without measuring the meaning behind the click through, advertisers leave an awful lot of useful information on the table. By understanding the reason behind every click through, advertisers can do a much better job of meeting the needs and expectations of site visitors and increase conversion rates.
Advertisers want to know why people are clicking on their ads. There is a huge delta between the site visitor who clicks on a web link and then on their browser's back button a few seconds later, and the visitor who goes to several site pages and ends up making a purchase.
One of the most valuable metrics is the measurement of consumer intention. While a visitor to a site may have an interest in the products and services being offered on that site, a single visit doesn't tell much of a story. In truth, many site visitors click on links to get a better sense of what's being offered and immediately back away if it doesn't meet their needs. Yet the value of a "temporary" click through carries the exact same weight as a click through from a site visitor who stays on the site for a meaningful period of time and ends up becoming a customer.
By using behavioral targeting, the value of each click through to the site can be directly ascertained. By measuring the reason behind the click along with what takes place after the click, publishers are able to effectively identify those site visitors who show intentional behaviors vs. those who came to a site to merely "kick the tires." By adding a record of the pages visited while on the site, the topics covered, the features interacted with, the length of time of each visit and when key performance indicators (KPIs) were achieved, advertisers have access to data that tells a much more complete story.
CTR can be used as an important metric, but the real power lies in being able to measure the reasons behind the click through. Would you rather have a click from someone who you KNOW is interested in your offering, or from someone who MIGHT be interested? Using behavioral targeting to identify the "why" behind each click offers advertisers the alternative of "smart CTR" and gives them a serious advantage over those still relying on CTR alone.
Hirsch is the chief revenue officer of Revenue Science. Previously he was at ValueClick where, as senior vice president of business development, he was responsible for strengthening and expanding the company's publisher networks. Prior to that, he held the position of chief revenue officer of Fastclick.com, Inc. where, for more than four years, his responsibilities included managing all sales, business development and marketing activities. Hirsch also served a stint as vice president of business development at pre-IPO ValueClick in 1999 and prior to that was a founder of software company Xymox Systems which, under his leadership, made the 1993 Inc. 500's list of fastest growing private companies.