Click-Through Rate Jumps 11.4% After Google Changes “Sponsored Links” to “Ads”

Posted on Monday, November 15th, 2010 by Print This Post Print This Post

Categories - Featured, News, SEM

Last week, we covered Google’s recent switch from “Sponsored Links” to “Ads” as the disclosure label above the pay-per-click advertisements, as shown here:

Google confirmed having rolled out this change on English language domains November 4.

And a recent study form Harvard Business School Professor Benjamin Edelman suggests that such a change could have a dramatic impact on search marketing performance.  Edelman conducted an online experiment in which he measured a random collection of users’ interactions with search engines, both in the standard configuration, as well as in an altered version in which he changes the advertisement disclosure label.   For half the subjects in the study, Edelman’s team replaced the “Sponsored Links” label with “Paid Advertisements and the other half were served the standard results page.  Across all subjects in the study, Edelman found that users exposed to the “paid advertisement” label clicked on 25 to 33% fewer advertisements than the control group which saw “Sponsored Links.”

Our Research

A 25 to 33% reduction in CTR would be significant for most advertisers.  Now that the “Ads” disclosure label has been rolled out in the U.S. for more than a week, our research team set out  to measure the actual impact of this change on advertising performance.

Methodology

Our analysts looked at AdWords data for all clients of The Search Agency running campaigns in the United States from October 28 – November 10.  We excluded any campaigns that significantly increased or decreased their budget during this time, as well as any campaigns in which our Account Managers had implemented a keyword expansion or culling.

This data set includes over 80 million impressions and 1.5 million clicks and for both business-to-consumer and business-to-business advertisers across a wide range of industry verticals.

To determine the impact of Google’s change on our clients’ performance, our analysts conducted a pre/post analysis — comparing six key metrics for the last 7 days of “Sponsored Links” to the first 7 days of “Ads”.

Results

Across all AdWords campaigns in our sample, we found the following changes in account performance:

  • Average position increased 1.5%
  • Total impressions decreased 1.5%
  • Total clicks increased 9.7%
  • Average Click-Through Rate (CTR) increased 11.4%
  • Average cost per click (CPC) dropped 2.3%
  • Total cost increased 7.1%

Contrary to what we may have expected, CTR has increased 11.4% since Google went to the “Ads” disclosure label, with no significant shift in average position or CPC.

Conclusion

After reviewing Edelman’s research, no one here predicted that CTR would increase by double digits.  Rather, our team expected the change to have little to no effect.  Our hypothesis was that the average search user has become so familiar with the general layout of the Google results page, that a change in wording on a small label would likely go unnoticed.

As Edelman points out in his study, the disclosure labels are, in fact, the smallest text on the page.  And while one could argue that the term “Ads” is more clear and explicit than “Sponsored Links,” Google has in fact deleted 11 characters; thereby making the already minuscule label that much more inconspicuous.

Conspiracy theorists have plenty of fodder with this most recent innovation.  Did Google make the change in response to increasing pressure from the Federal Trade Commission?  In testing this change, did Google see a similar jump in CTR and accelerate its implementation?

Bottom Line:  Google’s switch from “Sponsored Links” to “Ads” has not had a negative impact on advertiser performance.  In fact, it may have had just the opposite effect – searchers have clicked on a higher percentage of ads since Google made the switch.

With all the recent changes Google has made to the results page, however, who knows if there’s any real correlation between this latest modification and an 11.4% increase in CTR?  Either way, we’ll be watching this trend very closely over the coming weeks.  In the meantime, what type of results are you seeing in your accounts?   Leave a comment and let us know.

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40 Responses to “Click-Through Rate Jumps 11.4% After Google Changes “Sponsored Links” to “Ads””

  1. This research is quite interesting; however I believe there have been too many other changes recently that would in my opinion impact the CTR by such a high number. Taking the example used in the image above for the iPod charger. It was only a matter of weeks ago that Google allowed trademarked terms to be used. Previously, no other retailers but Apple could bid on the term iPod and Apple would have the majority of 1st page listings in the SERP’s for this term. Now the competition has been opened up there is a lot more choice for the user therefore increasing the chance of a CTR whilst reducing the impressions as the user is more likely to find what they are looking for in the first page. It stands to reason that just because a person wants to by an Apple product they don’t necessarily want to buy direct as many other big chained retailers are often able to discount the listed price.

  2. Philip Pollock says:

    Surely the increase in CTR has something to do with the decrease in impressions which is nothing to do with the change in labeling?

    I would conclude that the CTR and change in labeling are not related and it is some other factor causing this, such as site links

  3. David says:

    Hmmm… i mean you might be onto something there maybe it’s improves trust through better transparency?

    Looking at one of my bigger campaigns there is a 27.1% increase in CTR but only a 0.69% drop in CPC which is not much of an impact.

    Other campaign has lower budgets but also has super high quality scores only saw a 6.87% increase in CTR but a 15.96% increase in CPC rates.

    Similar to the Google Instant roll out the first week or two’s data may not stay consistent and it may slip back into previous CTR and CPC rates.

    • Alec Green says:

      Thanks for sharing your data David. Very interesting that you’re also seeing an increase in CTR. We agree that this trend may not hold, so we plan to revisit after 30 days. We’re also going to look at the data year-over-year to see if we have a similar impact.

  4. SEO Raleigh says:

    Thats great info. I cant say I have seen the same increase on my clients but I have seen no negative impact at all. If anything it makes it more transparent to searchers.

  5. David says:

    Very interesting that CTR went up 11%+ while CPC only fell 2.3%, this seems to be a lever that Google has pulled that will result in them generating more revenue / search impression than historically. In theory the traffic should perform the same so in theory an advertiser should see a beter CPA / ROI (if only slightly better) but can see an increase in traffic and budget allocated to search.

  6. Ryan Miller says:

    Very interesting initial results. I’d love to see a longer study (30 days of “sponsored links” against 30 days of “ads”) to see if CTR increase you saw was a coincidental fluke or influenced directly in some part to name change.

    • Alec Green says:

      Thanks Ryan. We agree. One week is certainly not enough time to draw any meaningful long-term conclusions. Because Google has implemented so many changes in recent months, teasing out the impact of this latest innovation is almost impossible. In addition, seasonality can always be a confounding factor anytime you conduct a pre/post analysis. But given the results from Edelman’s study, we didn’t want to wait to measure the actual impact on performance, only to find results that were far more damaging. We will definitely revisit this data after 30 days.

  7. N3O says:

    One question, was Google Search and Search Partners (not Display Network) segmented? Because the change only affected Google Search and that would skew the numbers.

    • Alec Green says:

      Thanks N30. This is a great point. And yes, our data only includes impressions from the Google results page.

      • N3O says:

        Alright, because at first I saw a similar change i.e. an increase in CTR, but when I dug into the data I saw that the CTR for my Google Search segment had reduced a bit.

        Anyway interesting results nonetheless, but there are always tons of variables so who knows what really caused the changes.

        One more thing you could do is check some historical numbers, maybe compare same dates for last year as Freeslyn mentioned that it could be the season, the absolute numbers wouldn’t be helpful because there have been so many changes in the SERPs, but relative numbers may give you a better picture.

  8. Freeslyn says:

    These results may have been a bit more meaningful to me had the switch not occurred in sync with the start of the holiday shopping season.

    • Alec Green says:

      Thanks Freeslyn. Great point, and this is always a confounding factor when conducting a pre/post analysis. When we re-run this data after 30 days, we’ll also compare year-over-year metrics to provide some additional data points.

  9. I am usually very skeptical of this type of data However, I believe there is a correlation between the CTR and the change.

    The argument “a week is not enough time” is not practical. Sample size accuracy comes down to confidence intervals. With 80,000,000 impressions and 1,500,000 clicks, we can be 99% confident the true population falls between +-.1% of the sample.

    Look at it through Google’s eyes. Individual campaigns don’t really benefit from this, quality scores are relative. At the end of the day, it means more people are clicking ads that Google is profiting from.

  10. I should note, the ad label change happened globally on November 5th.

    Your data comes from October?

    • Alec Green says:

      Hi Barry,
      Just to clarify, our data compares performance on the last 7 days of “Sponsored Links” to the first 7 days of “Ads”.

      Based on Prof. Edelman’s article, we were under the impression that Google made the switch on November 4. Which is why we chose Oct. 28 – Nov. 3 as the “pre” period, and Nov. 4 – Nov. 10 as the “post” period.

      We will revisit this data again after 30 days.

  11. simon says:

    Hey DH and Alec, Good to see TSA generating some buzz around the SEO/SEM circles.

    Couple points:

    1) how can the “ads” label affect position and impressions at all?

    2) if the “ads” label doesn’t affect position and impressions, what does that do to Clicks, CTR, and Cost if you adjust the numbers to factor those out?

    3) CTR increases, but so does Cost. I’m wondering how this has affected ROI. Did you see ROI go up proportionately or higher than the increased costs? Or do you think the “ads” label change has started generating lesser qualified clicks?

    Simon

    • Alec Green says:

      Hi Simon,
      Thanks for reading and commenting.
      To address your points:
      1. The change in disclosure label shouldn’t have any direct impact on position or impressions. But week-to-week, there will be some natural variance. We included the data showing the 1.5% decrease simply to show that it wasn’t a dramatic change in impressions which caused the change in CTR.
      2. Not sure how we would re-run the analysis to control for change in impressions and position. Although there was a small shift in average position and total impressions, it wasn’t as significant as the change in CTR.
      3. We did not include conversion or ROI data in this analysis, but will definitely include them as endpoints in our 30-day follow-up study.
      Thanks, Alec

  12. Dan says:

    ‘Ads’ is a lot shorter (and therefore easier to miss) than ‘Sponsored Links’.

    My hunch would be that this alone could improve CTR, ie searchers are more likely not to see it at all.

    I take all the points about sample size, correlation etc, but the bottom line is that Google will have tested the hell out of this. If it didn’t improve CTR and ROI *for Google*, then they wouldn’t have implemented it.

    Now, someone work out what that small change will mean in $ for Google over a 12 month period …

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  14. SEO Raleigh says:

    Anytime you can be more honest with the end users and generate more business at the same time it is a win for everyone. The real test I am sure it has been answered by now and that is what is the end result after a few months.

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