Click Through Rate (CTR) is a measure of how effective your Ads and keywords are at getting users to click through. It’s calculated by dividing clicks by impressions:

CTR = CLICKS / IMPRESSIONS

A high AdWords CTR is always desirable. You should take action to improve it for all your ads and keywords and look to maintain a CTR of 1% for your Search campaigns.

When a user turns to a search engine, they have a question and are looking for an answer. They are expressing a need or want.

What makes search so great is users are telling you exactly what they are looking for! They’ve already decided they need something and are now trying to find it.

Creating a relevant paid search ad is your first step as an advertiser in fulfilling that need.

If you have a:

• High CTR, users are finding your ad to be highly relevant.
• Low CTR, users are finding your ad to be less relevant.

The ultimate goal of any PPC campaign is to get qualified users to come to your website and perform a desired action (e.g., make a purchase, fill out a lead or contact form, download a spec sheet).

How CTR Impacts Ad Rank

CTR is not just an indication of how relevant your ads are to searchers. CTR also contributes to your Ad Rank in the search engines.

Ad rank determines the position of your ad on the search results page.

What affects CTR?

Ad Position
This is perhaps the most important factor to your CTRs. If ads are in the top positions, they’ll consistently have higher CTRs than ads that rank at the bottom.

Even the most highly targeted ads that rank at the bottom will have low CTRs.

So it’s important that positions for your Ads are high and that you have a high Ad Rank if you want to achieve good CTRs.

Ad Relevance
Relevant ads attract more clicks. When users see that the ads are related to what they are looking for, they’ll click through and that will impact CTR positively.

CTR impacts ‘Expected CTR’, one of the factors to Quality Score performance.

And with combined ‘Ad Relevance’, another Quality Score factor, this can help you achieve good quality scores that are a good performance indicator for your account.

Ad Extensions 
Ad extensions give your ad more prominence in the search results. They make your ads stand out from competitors’ and encourage users to click through to your website.

Adding many targeted ad extensions for sitelinks, callouts, structured snippets etc improves ad quality. And this leads to a higher Ad Rank which results in higher click through rates.

Bids
Bids are one of two factors to Ad Rank. And your Ad Rank determines the click through rate for your ads – with higher positioned ads getting a significantly better CTR.

So, to achieve a higher position in the search results, you should bid higher to secure a higher position and also achieve a good CTR.

Search Terms
Each keyword will drive multiple searches to your ads. Some of these searches will be relevant and some won’t.

And they’ll each have their own CTRs which you can see when you check the search terms report.

Short conclusion

To restate the former, remember that high CTRs don’t necessarily mean that you’ll have high conversion rates or a high amount of conversions.

Similarly, an increase in CTRs don’t signal that things are improving for the account.

You need to ensure that the ad copy you have matches what the customer might expect to see on the landing page. If not, they’ll more than likely bounce off your page, costing you however much that click cost.