Conversion Rate vs. Click-Through Rate and How to Calculate Them
The clickthrough rate (CTR) is a metric that’s been around since the earliest days of internet advertising. Historically, it was used to measure banner ad performance. The very first internet banner ads were launched on a website called HotWired, way back in 1994. Here it is, in all its glory:
Source: Internet History Podcast
Each time a banner ad loads onto a webpage, it’s called an impression. The number of clicks divided by the number of impressions is how we get the CTR of the ad. So the CTR formula is:
Clickthrough rate = (Clicks / Impressions) x 100 = CTR %
You can calculate the CTR for anything that’s clickable on a webpage, in an email, or in a mobile app. That includes an ad like a banner, a button, a link, an image, or other object. Determining the CTR of a thing helps you understand what messaging, images, and experiences resonate with your customers and users. But CTR only tells half the story. The other half? Conversion rate.
A conversion is an action that someone takes that goes beyond a click. A sale is a conversion, but so is an email signup, a website subscription or a webinar registration. A conversion involves an exchange of information – a customer’s email address, contact information, or credit card number (for example). To calculate the conversion rate of something, you divide the number of conversions, whatever they may be, by the total visitors for a specified time (e.g., week, month, year) and multiply it by 100. Let’s say you’re tracking the conversion rate for sales on your eCommerce website, the formula for how to calculate conversion rate would look like this:
Conversion rate = (Total Sales / Total Visits) x 100 = CR %
That’s the basics of CTR vs CR, but there’s a lot more to unpack including why each of these metrics are important and how they work together to help you understand the performance of a given digital element like an ad campaign or webpage.
Understanding Click-Through Rate (CTR)
Historically, there’s been a lot of emphasis given to CTR versus CR, particularly when it comes to measuring the impact of internet advertising. When banners first entered the digital marketing landscape in the mid-1990s, CTRs were high.
That mediocre HotWired banner, which was for AT&T, had a CTR of 44% when it launched. These days, the average CTR for a Google ad ranges from between 3 – 5%. Banners get much lower CTRs ranging between .26% and .46% depending on the industry, the source, and lots of other bits and pieces that contribute to overall performance.
Think of CTR as a thermometer that takes the temperature of whatever it is you’re measuring. A high CTR may or may not be meaningful – since people click on things for many reasons including “click bait” – which is when a headline or image presents provocative information for the sole reason of catching someone’s attention and getting them to click.
Why Are Click-Through Rates Important?
CTR remains a top key performance indicator (KPI) in 2023. Again, it helps you take the temperature of a given ad. A hot piece of content, social media post, email message, or navigation element is one that’s resonating with your audience.
Having a good CTR can even save you money, at least, if you’re advertising on Google. A high CTR contributes to a better Quality Score on Google Ads, which reduces the cost per click (CPC) of your ads and can improve your ad’s position in the paid search results.
In 2023, CTRs varied significantly depending on the platform and industry. Here’s a breakdown of different average CTRs by industry and media type, but also by the source of the data:
- Paid search ads on Google: The average CTR is about 3%
- Display ads on Google: average CTR is about .46%
- Email – The average CTR (of people who open the email) ranges from between and 8.9% and 10.3%
- Social media ads: About 1.4%
The Complexity and Misconceptions of High CTRs
The above CTRs are averages taken from sources like Statista and Smart Insights, but these are just numbers to be aware of rather than plan a campaign around. It’s important to benchmark CTRs for your industry and understand averages across different media types (e.g., banners versus text ads) so you can set appropriate expectations when measuring performance.
It’s possible to put too much emphasis on high CTRs for a given campaign which can then lead to the false assumption that a campaign, ad creative, or message is performing well when it isn’t.
That’s because CTR doesn’t automatically translate to success based on bottom-line metrics like ROI and revenue. That is, high CTRs can be misleading, particularly if they don’t lead to actual sales or meaningful conversions. It’s essential to look at CTR alongside other metrics like CR to get a fuller picture of a given campaign’s effectiveness so you’re not investing time, budget, and resources into low performing initiatives.
Understanding Conversion Rate
Conversion rates, as a meaningful KPI, are a much more tangible measure of marketing effectiveness than CTR alone. You can maximize CRs by sharpening ad copy, optimizing landing pages, and performing A/B testing to see how new buying funnels and experiences move the revenue needle (so to speak).
Significance of CR for Business Success
Conversion rates, when measured accurately, can help you track the profitability of a given campaign or initiative. Higher conversion rates translate to more customer actions like purchases, sign-ups, and contact form completions. It is, however, important to make sure that the right people are converting.
If you’re getting a ton of free trial signups, but very few conversions to paying customers, then you need to look at who you’re targeting, your messaging, and your entire lead generation approach.
When conversion rates reflect high-quality leads or actual sales, they signal an effective marketing effort or message. Converting high-value visitors to customers suggests that you’re on the right track when it comes to effective marketing approaches, user experience, and messaging.
Low conversion rates typically mean the opposite. Even so, the information you get from a poor performing campaign or A/B test is incredibly valuable. Poor CRs help you pinpoint areas for improvement in marketing and website design. Using this information to improve your customer and user experience is called conversion rate optimization (CRO). CRO focuses on refining marketing strategies and user experiences to improve sales and lead gen strategies.
Adapting your approach for different types of conversions
The types of conversions you’re tracking vary depending on the specific goals of your campaign. Here are some ways to adapt the CR formula based on different marketing objectives:
- Lead generation – Leads like email sign-ups or account registrations require a CR formula that focuses on the number of visitors who complete a sign-up form divided by the total number of visitors referred by a campaign. You can also get a baseline conversion rate for your website by dividing total website visitors by total leads generated before you launch a new campaign. For results to be meaningful, you’ll need to create a clear definition of what constitutes a ‘lead’.
- Sales – For eCommerce, a conversion is typically defined as a purchase. Here, the formula should calculate the number of visitors who complete a purchase divided by the total number of visitors to your website. You can segment sales by different product categories or customer demographics to for more insight into what products, customers, and categories convert best.
- Content engagement – For B2B audiences, the goal is often a combination of lead generation and content engagement which includes registering for, then downloading or viewing a whitepaper, webinar, or video. In this case, the CR formula should measure the number of visitors who download the content or meet the engagement criteria divided by the total number of visitors referred by your campaign/ad/initiative.
- App downloads – For mobile apps, a conversion is an app download so the formula would be the number of downloads divided by the number of users who clicked on the ad.
A note about micro conversions
While marketers tend to focus on macro conversions like sales or leads, monitoring micro conversions also provides a wealth of insight about why or why not a campaign is resonating. Look at user actions like time spent a page, multiple pages views, exit pages, and chatbot interactions to better understand how engaging an overall experience is for your visitors. Tracking micro conversions provides deeper insights into user behavior which allow you to optimize the overall customer journey.
Just like you shouldn’t take CTR at face value, you should look at other metrics and signals to determine the value of your conversions. Factors like the source of traffic, user intent, and relevance of the content or product to the user’s needs can help you understand the effectiveness of conversion rate as a metric.
The Importance and Differences of CTR and Conversion Rates
CTR and CR each play a unique role in shaping your marketing strategies and decisions. While the former can help gauge ad and campaign effectiveness, the latter is all about performance. It lets you know if your content or campaign or targeting criteria are driving audience engagement, inspiring conversions, and resonating with people.
CTR is affected by elements like ad design, ad type (e.g., a text versus video ad) targeting, and placement (e.g., Facebook versus TikTok). The best way to create compelling ad copy and improve conversions is by using A/B testing to experiment with ad variations, copy variations on landing pages, audience targeting, and testing a mix of visuals, keywords, and CTAs.
Conversion Tracking Tools to Boost Your Business
Tools like Google Analytics and Kissmetrics track website traffic, visitor behavior, and conversions. The free version of Google Analytics allows you to track website visitor behavior, see some of the keywords visitors use to find you, and lets you drill down into user details like operating system, device, and region. Kissmetrics provides a bit more detail into user behavior.
Selecting the right tool depends on your specific needs and whether or not you want to beyond simple campaign tracking to focus on CRO. Monetate has an easy-to-use A/B and A/B/n testing tool that helps marketers identify new revenue-generating tactics quickly and compare different versions of web pages in real time. The ability to quickly understand which versions of a landing page perform better for CTR, CR, or another KPI helps you implement changes – and get positive results – quickly. If your goal is effective CRO, then using a mix of different testing and tracking tools will give you the most insight.
Considerations in the Marketing Funnel
Aligning CTR and CR with broader marketing objectives requires a full understanding – and monitoring of – both metrics at various stages of the marketing funnel. CTR is often a top-of-funnel metric that can tell you how effective an ad or page element is at capturing someone’s attention. Use CTR to help you optimize for visibility and user interest.
As potential customers move down the funnel, your focus should be on CR since this reflects how effective your campaign (or page element) is at converting shoppers into buyers and customers. Tangible actions like purchases or sign-ups are, after all, what contributes to revenue, increased ROI, and business growth.
Both metrics work together to keep campaigns effective since they ensure the strategies and tactics you use attract potential customers and effectively motivate them to convert. Balancing and interpreting both metrics in tandem allows for a comprehensive understanding of overall marketing effectiveness. This is the intel that should guide the strategic adjustments that improve ROI and help you meet your business goals.