Ad Position Analysis
There are many benefits of being in the top position in Google Ad words – Higher click-through rate (CTR), more impressions, greater share of search, and a greater likelihood of increased conversions. Unfortunately, along with these benefits, come additional costs for the advertiser.
Assuming an ad with an average quality score, cost at an average ad position of 1 is 30% more than in position 2 and cost at position 2 is 20% more than in position 3. Consequently, brands would want to economize ad campaigns by reducing their bids to settle for a lower ad position. However, this is a mistake that can cost them dear because lowering your cost per click is not useful if you’re paying low prices for irrelevant clicks. By discovering new, relevant and valuable clicks, the distribution of your budget will improve substantially.
Here’s something interesting!
Click through Rates fall by 80% between an average position of 2-3 and a further 18% by a position of 3-4. For generic keywords, brands can target an average position till 4-5 but for brand specific terms, accumulating clicks beyond an average position of 3-4 is highly unlikely.
For a Global manufacturer and marketer of consumer and professional products, we analyzed Paid Search Data from Google Ad words for 6 months ending September 2014 to find the ‘Sweet Spot’ of average position for their brand. For all brands, we observed a maximum CTR at an average position of 1-2 followed by a steep decline of 80% at an average position 2-3. The image on the left shows a comparison of CTR with average Ad Position across brands.
As depicted by the chart on the left, Ads beyond position 3 are hardly clicked. Brands need to make sure their ads are placed in the top 3 positions to increase clicks. Since, top 3 positions are more expensive to bid, one needs to prioritize between campaigns and brands. Also, a great Quality Score reduces the cost involved in bidding for the top position.
The image on the right quantifies the fall in CTR at position 3 and 4. We found that at position 3, CTR for Branded keywords falls by 65%, whereas CTR for Generic keywords falls by 40%. CTR for Branded keywords tends to zero in fewer ad positions than for generic keywords.
More than 90% of clicks are associated with generic keywords for products related to general categories, while close to 30% clicks are associated with branded keywords related to personal products. Branded keywords see a steeper fall in both CPC and CTR compared to a more gradual fall for generic keywords.
It is clear that CTR at top positions are considerably higher than those at lower positions. This suggests that most consumers conduct limited search and have small consideration sets. More clicks at lower positions suggest that consumers may be evaluating more ads before making their purchase decisions; these consumers will be having higher purchase intent. In this case, placing ads at intermediate positions may be an effective way to reach higher purchase intent consumers without paying more for the top positions.
We conclude by saying that Generic keywords are more contextual than Branded keywords and require a careful design depending on personal vs general category brands to attain maximum clicks.