Digital marketing exams keep coming back to the same calculations. This guide gathers every useful formula, each with a worked example. It complements the article CPM, CTR, CPC, CPA, ROAS: reading ad metrics, which focuses on how to interpret the numbers.
Basic vocabulary
- Impression: one time the ad is displayed on a screen.
- Reach: the number of different people who saw it.
- Frequency: the average number of times each person saw it.
- Click: an interaction with the ad’s link.
- Conversion: the desired action (purchase, sign-up, call…).
The formulas, one by one
CPM: cost per thousand impressions
CPM = (spend ÷ impressions) × 1,000
Example. $200 spent for 80,000 impressions: 200 ÷ 80,000 × 1,000 = $2.50 CPM.
CPM measures the price of visibility. It varies with audience, season, competition and country.
CTR: click-through rate
CTR = (clicks ÷ impressions) × 100
Example. 800 clicks from 80,000 impressions: 800 ÷ 80,000 × 100 = 1%.
A high CTR indicates that the creative grabs attention.
CPC: cost per click
CPC = spend ÷ clicks
Example. $200 for 800 clicks: 200 ÷ 800 = $0.25.
CPC can also be derived from CPM and CTR: CPC = CPM ÷ (1,000 × CTR). With a $2.50 CPM and a 1% CTR (0.01), you get 2.50 ÷ 10 = $0.25. This relationship explains why a better creative (higher CTR) lowers CPC at a constant CPM.
Conversion rate
Conversion rate = (conversions ÷ clicks) × 100
Example. 24 purchases from 800 clicks: 24 ÷ 800 × 100 = 3%.
This rate depends as much on the website or landing page as on the ad.
CPA: cost per acquisition
CPA = spend ÷ conversions
Example. $200 for 24 purchases: 200 ÷ 24 ≈ $8.33.
You can also write CPA = CPC ÷ conversion rate: 0.25 ÷ 0.03 ≈ $8.33. To lower CPA you therefore work on three levers: CPM, CTR and conversion rate.
ROAS: return on ad spend
ROAS = revenue generated by the ads ÷ ad spend
Example. 24 purchases at $60 = $1,440 in sales for $200 spent: 1,440 ÷ 200 = 7.2 (read as “$7.20 in sales for every $1 invested”).
ROI: return on investment
ROI = (gain − cost) ÷ cost × 100
Here the “gain” must be a profit, that is, after deducting product costs. If the $1,440 in sales leaves $720 of gross margin and the ads cost $200: (720 − 200) ÷ 200 × 100 = 260%.
Do not confuse ROAS and ROI. ROAS compares sales to ad cost; ROI accounts for margins and all costs.
Break-even ROAS
Break-even ROAS = 1 ÷ margin rate
Example. A product sold at a 40% gross margin: 1 ÷ 0.40 = 2.5. Below this ROAS each sale loses money after advertising; above it, the campaign makes a profit before fixed costs.
Summary table
| Metric | Formula | Used for |
|---|---|---|
| CPM | spend ÷ impressions × 1,000 | Price of visibility |
| CTR | clicks ÷ impressions | Appeal of the creative |
| CPC | spend ÷ clicks | Price of a visit |
| Conversion rate | conversions ÷ clicks | Page effectiveness |
| CPA | spend ÷ conversions | Price of a result |
| ROAS | sales ÷ spend | Ad profitability |
| ROI | (gain − cost) ÷ cost | Overall profitability |
The reverse calculation: budget needed
You can start from a goal to work out the budget.
Example. Goal: 50 sign-ups. Estimated CPA: $6. Budget needed: 50 × 6 = $300. Over 15 days: 300 ÷ 15 = $20 per day.
To check whether the budget leaves the algorithm enough data, read How to create a Facebook Ads campaign.
Common pitfalls
- Comparing CPMs across different objectives: an awareness campaign and a sales campaign are not judged the same way.
- Judging a CTR without looking at conversion: many clicks with no purchases can signal a misleading promise.
- Calculating on too little data: three conversions prove nothing.
- Forgetting margin: a ROAS of 3 can still lose money on a low-margin product.
Practice in a simulator
In TRIALO, results are simulated but the relationships between metrics are realistic: changing the audience, budget or creative moves CPM, CTR and CPA. It is a good place to check these formulas against data the student produced. For TikTok, see Read the TikTok metrics.
Frequently asked questions
What is the difference between ROAS and ROI? ROAS relates sales to ad spend. ROI relates net profit to all costs. A decent ROAS can hide a negative ROI.
What is a good ROAS? There is no universal value: it depends on margin. Calculate the break-even ROAS (1 ÷ margin) and aim to beat it.
CPA or ROAS: which should I follow? CPA suits cases where every conversion is worth roughly the same (sign-ups); ROAS suits cases where amounts vary (e-commerce).
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