Observations on How Ad Position Impacts CTR, Conversion Rate and CPA

What's Your Favorite Position?

About 20 years before the birth of the Internet, Avis Rental Car had a popular slogan: "We're number two. We try harder". Fast-forwarding to today, some might say that in pay per click marketing, when your ad is not in the top positions of the paid search engines, you really do have to try harder to attract that qualified visitor and make the sale.

In fact, we can see by some of the lofty bid prices on popular keywords that many marketers are willing to pay a healthy premium to show as number one. But do the top positions bring the most cost effective results?

With the addition of Microsoft adCenter and Yahoo's new search marketing interface - "Panama", and Google's already robust pay per click campaign management interface, marketer's now have unprecedented control over a multitude of campaign factors.

The days of campaign success relying solely on good bid management are long over. Ad positioning related to quality score and click through rate (CTR), as well as the influence of ad scheduling, geo-targeting and demographic targeting have created an entirely new opportunity for strategy development. With all of that marketing capability, though, the relationship of different ad positions to CTR, conversion rate, and even cost per acquisition (CPA) is still an everyday uncertainty.

In hopes of finding some clues to the power of ad position, we compiled pay-per-click statistics from our portfolio of data for over a one-year period. The observations were based on a sample size of over 192 million impressions and over 2 million clicks in Google. Since we wanted the big-picture look, our data is "industry-agnostic" gathered across multiple industries, including B2B, B2C, lead generation and e-commerce.

Please note that this chart is a compilation from our portfolio of data and may not be representative of your products or your industry.

Here’s a summary of observations from our data sample:

Ad Position	CTR	Conversion Rate	CPA	Conversions per 10,000 Impressions
1.0 - 1.9	3.0%	1.9%	$60	5.5
2.0 - 2.9	0.9%	2.4%	$38	2.1
3.0 - 3.9	1.0%	1.6%	$60	1.6
4.0 - 4.9	2.3%	5.2%	$60	12.0
5.0 - 5.9	1.0%	2.8%	$84	2.8
6.0 - 6.9	1.5%	3.6%	$57	5.2
7.0 - 7.9	1.0%	7.8%	$50	7.6
8.0 - 8.9	1.1%	2.9%	$78	3.3
9.0 - 9.9	0.6%	3.4%	$74	2.2
10+	0.7%	2.4%	$85	1.7
Totals	1.2%	2.3%	$53	2.7

• CTR – Not too surprisingly, the highest CTR of 3.0% was found at position 1, while the lowest CTR of 0.6% was at position 9. Note that CTR for position 2 dropped significantly, with a slight gain in position 3 and an even higher CTR in position 4, the second highest CTR. We believe that position 4 did so well because many times the search engines show 3 paid listings on the left side of the screen, leaving the 4th position ad to show at the top of the right hand column.
• Conversion Rate - The highest Conversion Rate of 7.8% was found at position 7, while the lowest Conversion Rate of 1.6% was at position 3. The best conversion rates were generally at position 4 and lower.
  A possible reason for why the lower positions bring in generally higher conversion rates is that visitors who take the time to read 4 or more ads may be further along in the buying cycle. As they're at that stage where they are ready to purchase, they're looking for more of an exact match to their needs.
  Many prospects who are in the research mode will probably click on multiple listings higher up on the page to gather more general information on the product or service as well as information regarding differences in brands.
• CPA – The Cost Per Acquisition metric, perhaps the most important statistic, had its best value at position 2, while the worst CPA was found at position 10+.
  Note that due partially to its strong conversion rate, position 7 registered the 2nd best CPA in our compilation.
• Conversion Effectiveness Factor: Conversions per 10,000 impressions – Here’s a statistic that shows the likelihood that our ads at various positions ultimately led to a conversion. It depicts the number of conversions we recorded for every 10,000 impressions at that ad position.
  Our data showed that the highest rate of conversions per 10,000 impressions of 12.0 was found at position 4. This result was significantly higher than any other positions and likely shows the power of the 4th position in our data. The lowest rate of conversions per 10,000 impressions of 1.6 was experienced at position 3.

Putting It All Together

So, what can we conclude from our data collection? First, and most importantly, recognize that the results of our analysis are based on a collection of our data from various industries. Each industry will likely have its own "PPC personality" that to some extent will have an affect on how ad position impacts your Return on Investment.

The factors that make up this "PPC Personality" include:

• The nature of your products or services
• Researching, shopping, and buying behaviors of your prospects
• The marketing strategies and actions taken by your competitors
• Seasonality impacts for your industry

It's important to understand how the PPC personality of your industry impacts the success of your campaigns. The essence of successful PPC marketing does not rest on any one tactic. Constructing a thorough keyword list (with appropriate negative keywords); creative testing of ad titles, ad copy and landing pages; ad scheduling; and geo-targeting are all important ingredients in determining the most profitable position for your ads.

And finally, don't forget that your strategies are only as good as the integrity of your web analytics. Be sure your analytics are providing you accurate and timely measurement of all your key performance metrics.

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