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Clickthroughs: A Worse Location Ad Metric Than You Thought

That’s the view from an xAd-commissioned Nielsen study of geo-marketing campaign analytic tools.

xAd's Monica Ho
xAd’s Monica Ho

The online advertising industry has been wringing its hands over the use of clickthrough rates to understand the value of a digital ad campaign. While Monica Ho, SVP of marketing for location-based ad platform xAd, isn’t quite calling for the industry to “kill the click,” Nielsen’s research confirms what most industry observers have been saying for years: that CTR is a poor measure of online ad campaign success.

In the case of mobile — and location-based ads in particular — the use of CTR appears to be significantly misleading. At best, Ho says, CTR can be fine when considered in concert with other metrics, such as Secondary-Action Rate (SAR), which measures the percentage of people who “took an action” after clicking an ad. Another metric preferred by xAd is Store Visitation Lift (SVL), which essentially measures in-store traffic that directly stems from a geo-targeted mobile ad campaign.

The release of the study comes two weeks after xAd raised $50 million, in part, to elevate its own analytics platform, Footprints. And this week, the New York-based company unveiled its Location Labs research center.

CTR Is Not Enough

“Towards the end of 2013, we started discussing attribution in mobile advertising,” Ho says, when asked what prompted this joint study with Nielsen. “There seems to be a consensus in the industry that CTR may not be as effective a measure for mobile as it has been for desktop, however to-date there had been no research to support this idea. At the same time, measures such as click-to-call rate and store visitation that are newer and unique for mobile were lacking solid benchmarks for what could be considered ‘success.’”

Among the contentions from the Nielsen report, titled Defining Benchmarks For Mobile Success, which considered over 200 million ad impressions from 80 individual campaigns from 12 unidentified “major” brands in the Retail, Restaurant and Auto verticals are:

  • CTR alone is not a good indicator of ad awareness or engagement: While CTR may give an initial idea of brand exposure, it’s often unrelated, or negatively correlated, to engaged actions such as calls, directions, and store visits. It can also be easily influenced by factors outside the campaign itself – such as ad placement within an app – making it a weak indicator of actual performance.

  • Defining KPIs and optimizing towards them at the start of the campaign is essential: Driving awareness, engagement and conversions are separate goals, often requiring different techniques to ensure optimal performance.

  • Mobile’s role in purchase consideration varies by industry; expectations and the definition of success need to vary, too.

Despite tremendous growth in mobile advertising, this area is still relatively new territory for marketers, Ho notes. A lot of the techniques used for other forms of digital advertising were initially applied to this medium by default — including CTR — as a measure of success.

Transcending The Default Metric

However, as the mobile advertising industry evolves, marketers are more willing to explore alternatives to measuring the click when it comes to determining things like engagement or purchase intent. Roughly 1 in 5 campaigns on the xAd platform are currently measuring their campaign success by SVL, or by the percentage of ad-exposed audience that visited a trial location divided by non-ad exposed visitors, Ho says.

brand campaign metrics
The example above shows the CTR, SAR, and SVL for three campaigns that were run for the same brand as part of the study. While Campaign 1 had the highest CTR, the other two campaigns performed significantly better for driving secondary actions and store visits. If CTR were viewed in isolation from the other two, the true impact would be completely missed.

“CTR has been the default measurement in mobile because it is so commonly used in desktop banner ads,” she says. “One of the main goals of this study was to determine the most accurate ways to measure the success of a mobile campaign — which, frankly, is something that had never really been done before.”

The Click Is Still Kickin’

What xAd found was that more engaged metrics, such as SAR and SVL, are clearly better indicators of purchase intent. As mobile and location ads mature, Ho expects that awareness and use of newer measurement tactics such as SAR and SVL will increase.

Even if SAR and SVL do become more common currencies of metrics, Ho doesn’t anticipate the death of clicks in evaluating a campaign’s performance. But she does think CTR will be less important over time, especially as its defects become more apparent to marketers.

“Not only can this metric be misleading, as it can be inflated by accidental clicks, but it misses the full potential of mobile,” Ho says. “One of the most unique and promising aspects of mobile versus other forms of advertising is that it’s a very personal and on-the-go medium. Through mobile, we can capture metrics such as calls and store visitation, which are much stronger indicators of purchase intent that were not necessarily possible in other types of advertising.”