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Click-Through Rate (CTR)

The ratio of the number of users who click a specific link on a website or email to the number of users who viewed that link

What is Click-Through Rate (CTR)?

Click-through rate (CTR) refers to the ratio of the number of users exposed to a specific link on a website page or in an email who click the link and view the advertised product or service. CTR is primarily used by digital and online marketers to quantify the success and effectiveness of an email or advertising campaign.

 

Click-Through Rate

 

Click-Through Rate Formula

The click-through rate is the ratio between the number of users who click on a link and the number of users viewing the page the link is on. Mathematically, it can be expressed using the following formula:

 

Click-Through Rate - Formula

 

Where:

  • Total number of Clicks – The total number of users who clicked a specific link
  • Total number of Impressions – The total number of users who viewed a specific link (for email campaigns, the total number of impressions is the total number of email’s recipients).

 

Interpreting Click-Through Rates

The growing popularity of the internet around the world is forcing companies to pay close attention to the success of their online marketing. Nowadays, many companies rely on online marketing campaigns, and the click-through rate is an effective tool to assess them.

A high CTR is generally a positive indicator of people being attracted by a business’ advertising. On the other hand, a low CTR reveals some problems with the design of a marketing campaign.

No defined standard CTR exists for a successful campaign because the rates can significantly vary depending on the circumstances and situations. We can say that on average, a 2% CTR is generally considered as a highly successful rate.

 

Importance of Click-Through Rate

For digital and online marketers, click-through rates quantify the success of online advertising or email campaigns. Essentially, CTR quantifies the reaction of users to marketing or advertising campaigns. The metric is frequently employed in evaluating which ads and keywords are more successful than others.

If your CTR is low, it may indicate that you are targeting the wrong audience or spending money on irrelevant keywords. Additionally, the metric can help evaluate the success of different marketing channels (e.g., website 1 delivers 1% CTR and website 2 returns 3.5% CTR).

The click-through rate metric comes with one critical drawback. Although the click-through rate assesses how well users react to marketing or advertising campaign, it does not translate such success into monetary value. In other words, it is difficult to determine how specific marketing activities influence sales and revenue by only looking at the click-through rate.

Therefore, this metric is commonly used in combination with the conversion rate, which indicates the percentage of clicks that result in actual sales. Note that for email campaigns, the click-through rate is considered in combination with the metrics such as open rate and bounce rate.

 

More Resources

CFI is the official provider of the Financial Modeling and Valuation Analyst (FMVA)™ certification program, designed to transform anyone into a world-class financial analyst.

To keep learning and developing your knowledge of financial analysis, we highly recommend the additional CFI resources below:

  • 5 P’s of Marketing
  • Click and Mortar
  • E-commerce Business Models
  • Pay-Per-Click (PPC)