High CTR = Low EPC explained
September 27, 2006
Conventional business wisdom dictates that the more of something you sell, the more money you make. If you make ten bucks on an item and sell five of them, you make fifty dollars. Sell ten and make a hundred. That just makes sense.
That's not how AdSense works. Finally, Google has officially explained why not on the official AdSense blog.
High CTR, Low EPC
That's Google's official explanation. The shotgun method of advertising pays less because it draws a lot of traffic in but doesn't convert as well for the advertiser. A high click-through rate (CTR) therefore often translates into a lower earnings per click (EPC).
Low CTR, High EPC
The flip-side is that you may be getting a low CTR but still maintain a high EPC because your ads are appealing to a niche crowd who are more willing to buy.
So is high CTR bad?
This announcement from Google might lead some to believe that having a high CTR isn't a good thing. That is a mistaken assumption.
Yes, a high CTR will often lower EPC, but you will still earn more overall. For example, if you earn $25 per one hundred clicks with a CTR of 10%, that translates into $0.25 per click. One thousand clicks is therefore worth $250, and it takes 10,000 impressions to earn it.
However, with a lower CTR of, say, 2.5%, if you earn $50 per hundred clicks (twice as much), that translates to $0.50 per click. Sounds great, right? But since your CTR is only 2.5%, that same 10,000 impressions that earned $250 in the former example only earns $125 in this example.
So unless you're earning a phenomenal EPC despite a low CTR, you're still better off maximizing your pages for high CTR.
Soapbox Time
It's nice to have an official proclamation from Google about something AdSense publishers have been speculating about. Those proclamations are few and far between for the "lowly" AdSense publisher. I mean, we only earn Google half its multi-billion dollar income. But that's no reason to keep us filled in…
Comments
8 Responses to “High CTR = Low EPC explained”
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Jonathan Leger has been earning his living online full-time since the fall of 2004. He regularly posts advice about search engine optimization (his current passion), AdSense and Internet Marketing. 
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Jonathan. Jonathon here.
Nice post on a techie subject.When google crippled
payouts for ads, I got in the neck like everyone else.
I was not aware that Google explains themselves in any useful way. Perhaps I should look for an alternate
ad program. I think I would do well with Amazon.com.
Thanks for the info. I just looked at my adsense repotrts and felt sick because they are getting some of my site realestate for pennies. I do not think google adsesnse is worth the effort to even copy and paste the scropts.
cheers
Jon
A couple of weeks ago Google killed my site by not sending anymore traffic. Right now I mostly get visitors from MSN and Yahoo because of this. I am not sure why the drastic change but they did the same in June and it was almost gone for 2 months and then came back for 3 weeks until they "fixed" something in their Algo.
Anyway, this amde my AdSense earnings drop from over 200 a day to almost nothing so right now I am looking into some other type of ads and if MSN had the same setup with MSN ads I would switch immediately. Right now I don't have anything nice to say about Google when they mess up sites like they do and have done for months
Hi Jon,
Yea that's probably kind of bad news for pure adsense marketers, but is actually good news for advertisers. So if we have out eggs spread out over many baskets, we should be fine.
By the way, I'm sure you've read the death of adsense and life after adsense, and joel comm's special report as well?
What's your take on Scott's opinions on click-flipping?
Cheers!
Oops, I just saw your post on the report.
Yeah I guess adsense is alive and kicking afterall, but do what do you think of click-flipping? I know it's been around for very long, but his food chain theory seems to make some sense.
What do you think?
I don't know where some of you got your marketing education but Google's actions only makes 'cents'
from a marketer's standpoint.
Say you had a bricks&morter storefront - say a fryed chicken restaurant in the food-court of a popular mall.
You could have dozens of people in chicken costumes walking all around the city handing out flyers (w/affilate coded coupons) touting YOUR chicken.
If you paid each 'chicken' $0.10 per person, who walked up to your counter (PPC), 3% MIGHT spend $10 on food. Even if the flyers don't cost you a penny - you've got to ensure those 'chickens' hand-out flyers to mostly those people who are likely to buy.
If you're selling higher priced items/services you still want all those same flyers handed out (and the same ratio of flyer/buyer applies - 3%) you can make a whole lot more.
Unlike the example here - Google DOES have expenses when running Adsense ads on all those sites (servers, routers, employees, utilities, etc) so running ads which pull-in fewer 'buying' responses is a losing proposition - for Google AND their customers posting the PPC ads.
And please learn how to spell folks.
I appreciate the points in your comments lp115, but as to the snide comments about spelling… ahem…
"fryed chicken" — that's your spelling
"affilate coded coupons" — that's your spelling
So please try to be nice.
Yes, it's always nice when Google deigns to bestow us lowly servants a boon by keeping us apprised of its goings-on.
Keep up the good work. I don't know how you do it exactly, but I like reading your stuff.
Jamie Clarkson
These posts will make me think more deeply about what adsense words I promote, so thanks Jon