The Disadvantages of Cost per Click and CTR Planning

While Cost per Click is a very  important metric and the option to buy advertising based on performance is a very good thing it has its limitations.  Most advertising in the world is not sold by performance and, furthermore, “per inquiry” advertising has been around for generations in broadcast and print media.

The fact is that most advertisers don’t choose to buy performance based advertising.  It’s not that they don’t care about performance; it’s just that they realize that there are limitations to measuring performance in a specific media.

In the case of Cost per Click and CTR planning (which are really the same thing), some of the disadvantages are:

1.  It doesn’t help you with conversions. A high CTR might actually have a low conversion rate (and often does).   Some internet users just have a higher propensity to click, which doesn’t actually mean that they want to buy anything.  Usually, these people can be found in higher proportion at less popular sites (which is probably how they got there in the first place).

2. What about the people who don’t click?  High CTR’s are rarely much bigger than a few percent. What about the other 90%+ who didn’t click? Focusing exclusively on CTR ignores that opportunity.

3. It doesn’t tell you about coverage. You want to reach as many people as possible and the best spaces usually can’t be bought with PPC.

4. It doesn’t take into account other media.  Offline media can greatly influence online performance.  Why would an advertiser want to pay twice?

So while performance based pricing is something that should be seriously considered for any campaign, one shouldn’t assume that it’s automatically the best option.  Rather, it should be considered in the context of overall campaign goals, media and competitive activity etc.

– Greg