The three prices
- CPM is cost per 1,000 impressions. You pay for the ad being shown. Google Ads describes it as paying per one thousand views.
- CPC is cost per click. You pay when someone clicks. Google Ads' max. CPC is the most you'll typically be charged for a click; the actual CPC is often less.
- CPA is cost per acquisition, or per action: a sale, lead or sign-up. With Google Ads' Target CPA bidding you set the average cost per conversion you want.
The further down that list you go, the closer the price sits to the result you care about. Buying on CPM, you carry the risk that nobody clicks. Buying on CPC, you carry the risk that the people who click don't buy. With CPA bidding you name the cost per conversion you want and the platform's bidding aims for it.
One campaign, worked through
A small shop runs a social campaign:
- Spend: $1,800
- Impressions: 240,000
- Clicks: 2,160
- Purchases: 54
Each price is spend divided by one count:
CPM = $1,800 ÷ 240,000 × 1,000 = $7.50
CPC = $1,800 ÷ 2,160 = $0.83
CPA = $1,800 ÷ 54 = $33.33
And the two rates that link them:
CTR = 2,160 ÷ 240,000 × 100 = 0.90%
Conversion rate = 54 ÷ 2,160 × 100 = 2.50%
The conversion formulas
Because CPC is the CPM spread over the clicks that 1,000 impressions produce:
CPC = CPM ÷ (1,000 × CTR)
CPA = CPC ÷ conversion rate
CPA = CPM ÷ (1,000 × CTR × conversion rate)
Check them against the campaign: $7.50 ÷ (1,000 × 0.009) = $0.83, and $0.833 ÷ 0.025 = $33.33. The CPC calculator does the first conversion in either direction; the ad budget calculator runs the whole chain.
Comparing a CPM offer with a CPC offer
Suppose a publisher offers $12 CPM, and a search campaign for the same product costs $1.50 per click. Which is cheaper per click depends on the CTR you will get from the publisher's placement. The CTR where the two cost the same is:
Break-even CTR = CPM ÷ (1,000 × CPC) = $12 ÷ (1,000 × $1.50) = 0.80%
If the placement's CTR beats 0.8%, the CPM offer delivers cheaper clicks. If it falls short, paying per click is cheaper. The same trick works one level down: compare on CPA by putting your conversion rate into the sum, because clicks from two sources rarely convert at the same rate.
| Offer | CTR | Conversion rate | Cost per click | Cost per sale |
|---|---|---|---|---|
| $12 CPM | 1.00% | 2.0% | $1.20 | $60.00 |
| $12 CPM | 0.60% | 2.0% | $2.00 | $100.00 |
| $1.50 CPC | n/a | 2.0% | $1.50 | $75.00 |
On these assumptions the CPM placement wins at 1% CTR and loses at 0.6%. Your own CTR and conversion rate decide it.
Where the comparison goes wrong
Different click definitions. A "click" in one report may include taps anywhere on the ad, and in another only clicks through to your site. Use the narrowest count both platforms report.
Different attribution. CPA depends on which conversions a platform claims. Two platforms can both count the same sale. Compare CPAs measured in your own analytics, or at least on the same attribution window.
Different audiences. A cheap CPM on a broad audience and an expensive one on a narrow, ready-to-buy audience are not the same product. The CPA comparison takes care of this, which is why it is worth reaching.
Which number to manage to
Use the price furthest down the funnel that you can measure reliably. If you track sales well, judge campaigns on CPA (or on ROAS if order values vary). If conversions are rare or hard to track, CPC is the next best guide. CPM is useful for buying and forecasting reach, but on its own it says little about whether the money worked.