The short answer
| Objective | Bid on | Google Ads strategies named for it | What you still carry |
|---|---|---|---|
| Awareness, reach | CPM | CPM, tCPM, vCPM, Target Impression Share | Whether anyone clicks or buys |
| Traffic to your site | CPC | Maximize Clicks, Target CPC, Manual CPC | Whether visitors convert |
| Sales, leads, sign-ups | CPA | Target CPA, Maximize Conversions | Whether the tracked conversion is worth its cost |
Google Ads Help groups its bid strategies the same way: impressions for brand awareness, cost-per-click bidding for website traffic, and Smart Bidding strategies such as Target CPA when you want a direct action on your site and have conversion tracking set up. For what CPM, CPC and CPA mean and how to calculate each, see CPM vs CPC vs CPA explained. This guide is about choosing between them.
One campaign, three prices
The two formulas below convert any bid into the other two prices. Write CTR and conversion rate (CVR) as decimals, so 1.25% is 0.0125.
eCPC = CPM ÷ (1,000 × CTR)
CPA = CPC ÷ CVR
Run backwards, they give CPC = CPA × CVR and CPM = CPC × 1,000 × CTR. Every number in the three campaigns below is a made-up example chosen to keep the sums readable. They are not benchmarks, and your own CTR and conversion rate are the only ones that matter.
Example 1: awareness, bought on CPM
A festival wants as many people as possible in its city to see the dates. It buys on CPM.
- CPM paid: $6.00 (example)
- Impressions: 500,000, so spend = 500,000 ÷ 1,000 × $6.00 = $3,000
- CTR: 0.40% (example)
- Conversion rate to ticket sales: 1.50% (example)
eCPC = $6.00 ÷ (1,000 × 0.004) = $6.00 ÷ 4 = $1.50
CPA = $1.50 ÷ 0.015 = $100.00
Check against the counts: 500,000 × 0.004 = 2,000 clicks, and 2,000 × 0.015 = 30 sales. $3,000 ÷ 2,000 = $1.50 per click and $3,000 ÷ 30 = $100.00 per sale. A $100 cost per sale may look poor, but this campaign was bought to be seen, and the CPM is the number it should be judged on.
Example 2: traffic, bought on CPC
A recipe blog wants visitors to a new section. It buys on CPC.
- CPC paid: $0.80 (example)
- Clicks: 5,000, so spend = 5,000 × $0.80 = $4,000
- CTR: 1.25% (example)
- Conversion rate to newsletter sign-ups: 2.00% (example)
Effective CPM = $0.80 × 1,000 × 0.0125 = $10.00
CPA = $0.80 ÷ 0.02 = $40.00
Check: 5,000 ÷ 0.0125 = 400,000 impressions, and $4,000 ÷ 400,000 × 1,000 = $10.00. 5,000 × 0.02 = 100 sign-ups, and $4,000 ÷ 100 = $40.00.
Example 3: conversions, bought on CPA
An online shop has conversion tracking working and sets a $25 target CPA.
- Target CPA: $25.00 (example), reached on average
- Conversions: 120, so spend = 120 × $25.00 = $3,000
- Conversion rate: 4.00% (example)
- CTR: 2.00% (example)
CPC = $25.00 × 0.04 = $1.00
Effective CPM = $1.00 × 1,000 × 0.02 = $20.00
Check: 120 ÷ 0.04 = 3,000 clicks, and 3,000 ÷ 0.02 = 150,000 impressions. $3,000 ÷ 3,000 = $1.00 per click and $3,000 ÷ 150,000 × 1,000 = $20.00 per 1,000 impressions.
The three side by side
| Example | Bought on | CPM | CPC | CPA |
|---|---|---|---|---|
| 1. Awareness | CPM | $6.00 | $1.50 | $100.00 |
| 2. Traffic | CPC | $10.00 | $0.80 | $40.00 |
| 3. Conversions | CPA | $20.00 | $1.00 | $25.00 |
Read down any column and the "cheapest" campaign changes. The CPA campaign has the dearest impressions and the cheapest sales; the CPM campaign is the reverse. None of them is wrong. Each one is cheap on the metric it was bought on, and judging it on a different column judges it against a goal it did not have.
Who carries the risk under each model
Each bid type fixes one price and leaves the rest to chance. Whatever is not fixed, you carry.
CPM: you carry CTR and conversion rate. In example 1, if the CTR came in at 0.20% instead of 0.40%, the CPM would still be $6.00, but eCPC = $6.00 ÷ (1,000 × 0.002) = $3.00 and CPA = $3.00 ÷ 0.015 = $200.00. The platform delivered what you bought; the cost per sale doubled. That is the right trade when impressions are the goal, and a poor one when they are not. Google Ads Help says manual vCPM bidding probably isn't for you if the goal is a direct response, like buying a product or filling out a form.
CPC: the platform carries CTR, you carry conversion rate. In example 2, the blog pays $0.80 per click whether the ad is clicked by one viewer in 50 or one in 500. But if the sign-up rate fell from 2.00% to 1.00%, CPA would go from $40.00 to $0.80 ÷ 0.01 = $80.00. Google Ads Help describes Maximize Clicks as not a good choice if your goals include a specific cost per conversion.
CPA: the platform aims at your target, but it is a target, not a fixed price. Google Ads Help says that under Target CPA some conversions may cost more than your target and some less, while it tries to keep the average equal to the target. Google lists paying for conversions, instead of paying per click or engaged view, as an option for Display campaigns only, so on most campaigns the bill still arrives per click. What you carry here is the quality of what you count as a conversion. If the tracked action is a cheap one (a form view rather than a sale), the platform will hit the target on the wrong thing.
The pattern: the further down the funnel you bid, the more of the uncertainty the platform's bidding takes on, and the more your result depends on clean conversion tracking. When tracking is thin or conversions are rare, a CPC bid with a conversion rate you measure yourself is often safer than a CPA target the system cannot learn from.
Turning a target into a bid
Work backwards from what a result is worth to you. If a customer can cost at most $30 (the CAC calculator shows where that limit comes from) and your landing page converts at 2.5%, the most a click can cost is $30 × 0.025 = $0.75. With a 1.00% CTR, the most 1,000 impressions can cost is $0.75 × 1,000 × 0.01 = $7.50. Those are ceilings for each bid type built from the same goal. The CPC calculator converts CPM to CPC, and the ad budget calculator turns a target count of conversions into spend.