Click Through Rates

A Click Through Rate (CTR) is the proportion of clicks to impressions of some item of content shared online. This terminology is most commonly used in digital advertising but applies just as well to content websites might choose to feature on their homepage or in search results. A CTR is intuitively appealing as a metric for optimization. After all, if users are disinterested in some content, under normal circumstances, it's reasonable to assume they would ignore the content, rather than clicking on it. On the other hand, the best content is likely to elicit a high CTR as users signal their interest by following the hyperlink. In the advertising world, a website could charge per impression, per click, or per action. Both impression and action based pricing have asymmetrical results for the publisher and advertiser. However, paying per click (CPC based advertising) seems to strike a nice balance. For this and other numeric reasons, many digital advertising mechanisms (such as Google Adwords) use CPC as the payment mechanism. When charging per click, an advertising platform will value a high CTR when selecting which ad to show. As we learned in our episode on Goodhart's Law, once a measure is turned into a target, it ceases to be a good measure. While CTR alone does not entirely drive most online advertising algorithms, it does play an important role. Thus, advertisers are incentivized to adopt strategies that maximize CTR. On the surface, this sounds like a great idea: provide internet users what they are looking for, and be awarded with their attention and lower advertising costs. However, one possible unintended consequence of this type of optimization is the creation of ads which are designed solely to generate clicks, regardless of if the users are happy with the page they visit after clicking a link. So, at least in part, websites that optimize for higher CTRs are going to favor content that does a good job getting viewers to click it. G