Advertising metrics are ratios between two numbers. Knowing them by heart is not enough: you have to know which one to look at for each objective and how they connect. This article gives the definitions, a worked example that chains them, a reading table by objective and the most common interpretation mistakes.
The definitions
- CPM (cost per thousand impressions): cost divided by impressions, times 1,000. It measures the price of visibility.
- CTR (click-through rate): clicks divided by impressions. It measures how appealing the ad is.
- CPC (cost per click): cost divided by the number of clicks.
- CPA (cost per action): cost divided by the number of conversions (purchase, lead, sign-up).
- ROAS (return on ad spend): revenue generated divided by ad cost.
An example that chains all five
A campaign spends $200, gets 80,000 impressions, 800 clicks and 40 purchases, for $2,000 in revenue.
| Metric | Calculation | Result |
|---|---|---|
| CPM | 200 ÷ 80,000 × 1,000 | $2.50 |
| CTR | 800 ÷ 80,000 | 1% |
| CPC | 200 ÷ 800 | $0.25 |
| Conversion rate | 40 ÷ 800 | 5% |
| CPA | 200 ÷ 40 | $5 |
| ROAS | 2,000 ÷ 200 | 10 |
You can see how they fit together: the CPC equals the CPM divided by 1,000 and then by the CTR (2.5 ÷ 1,000 ÷ 0.01 = 0.25), and the CPA equals the CPC divided by the conversion rate (0.25 ÷ 0.05 = 5). In other words, improving the CTR or the conversion rate lowers the cost of each result without changing the price of visibility. For more solved exercises, see Digital marketing formulas.
Which metric for which objective
| Objective | Metrics to favor | Question to ask |
|---|---|---|
| Awareness | CPM, reach, frequency | What does visibility cost, and how often does each person see the ad? |
| Traffic | CTR, CPC | Does the ad make people want to click, and at what price? |
| Leads | CPA (cost per lead) | What does one lead cost? |
| Sales | CPA, ROAS | Does each dollar spent bring back more? |
See also Choose the campaign objective.
Reading metrics together
A single metric often misleads. A few cross-readings:
- High CPM and high CTR: the audience is expensive but responsive. The CPC may stay acceptable.
- High CTR and low conversion rate: the ad attracts, but the landing page disappoints.
- Low CPM and low CTR: cheap visibility, but little interest; the audience or the creative needs review.
- Rising frequency and falling CTR: a sign of ad fatigue, so refresh the creative.
The traps
- A high CTR does not guarantee sales: the landing page matters.
- A low CPM is not necessarily good: the audience may be poorly chosen.
- ROAS must be judged against margin, not on its own. A ROAS of 2 can be a losing one if the margin is below 50%.
- Comparing two campaigns with different objectives is meaningless.
- Concluding too early: with little data, ratios are unstable. See The learning phase.
And on TikTok?
The formulas are identical. What changes are the orders of magnitude and the weight of the video creative: CTR depends strongly on the hook. See Read the key TikTok metrics and The cost of Facebook and TikTok advertising.
Frequently asked questions
What is the difference between CPA and CPC? CPC divides cost by clicks; CPA divides it by conversions, meaning the actions that matter to the advertiser.
What is a good CTR? It depends on the sector, the format and the platform; compare your ads with each other rather than with a universal figure.
Are ROAS and ROI the same? No: ROAS relates revenue to ad spend, while ROI takes all costs and margin into account.
Practice
The guides Read the key metrics and Read the key TikTok metrics detail how to read them. In TRIALO you can generate fictional results and practice interpreting them. Request access.