CPM, CPC, CTR, CPA and ROAS Explained: Formulas and Examples for Marketers

A campaign with a 5% CTR can still lose money. A campaign with a ₹40 CPC can be your most profitable one. Ad metrics only make sense when you know what each one measures and how they connect. Here are the five metrics every marketer should understand, with simple formulas and one example that ties them together.

The five metrics at a glance

Metric	Full form	Formula	What it tells you
CPM	Cost per mille (1,000 impressions)	Spend ÷ impressions × 1,000	How expensive it is to be seen
CTR	Click-through rate	Clicks ÷ impressions × 100	How interesting your ad is
CPC	Cost per click	Spend ÷ clicks	What each visit costs
CPA	Cost per acquisition	Spend ÷ conversions	What each customer or lead costs
ROAS	Return on ad spend	Revenue ÷ spend	How much revenue each rupee brings back

One example, all five metrics

A Jaipur-based handmade jewellery brand runs an Instagram campaign for a week:

• Spend: ₹20,000
• Impressions: 2,00,000
• Clicks: 2,000
• Orders: 50, with an average order value of ₹1,600, so revenue is ₹80,000

Metric	Calculation	Result
CPM	₹20,000 ÷ 2,00,000 × 1,000	₹100
CTR	2,000 ÷ 2,00,000 × 100	1%
CPC	₹20,000 ÷ 2,000	₹10
CPA	₹20,000 ÷ 50	₹400
ROAS	₹80,000 ÷ ₹20,000	4x (or 400%)

CPM: the cost of being seen

CPM shows how much you pay for 1,000 impressions. It rises when competition is high (festive sales, IPL season) or when your audience is narrow. A lower CPM isn't always better: cheap impressions in the wrong place don't sell anything.

CTR: is your ad interesting?

CTR is the share of people who click after seeing your ad. Google defines it as clicks divided by impressions, so 5 clicks from 100 impressions is a 5% CTR. A good CTR depends on the platform and format, so compare against your own past campaigns.

CPC: the price of a visit

CPC is what each click costs. It's linked to the first two metrics: CPC = CPM ÷ (CTR × 10). In our example, ₹100 ÷ (1 × 10) = ₹10. So if your ad becomes more interesting (higher CTR), your CPC usually falls even if CPM stays the same.

CPA: the cost of a result

CPA is what you pay for each conversion: a sale, a lead, an install. It depends on traffic cost and on how well your website converts. If your website's conversion rate drops from 2.5% to 1.25%, your CPA doubles, even though the ads haven't changed.

ROAS: is it worth it?

ROAS compares revenue to ad spend. Google expresses it as a percentage: ₹5 in sales from ₹1 in ad spend is a 500% ROAS. But ROAS uses revenue, not profit, so a "good" ROAS depends on your margins.

Find your break-even ROAS

Use this simple formula: break-even ROAS = 1 ÷ gross margin.

• If you keep 50% of each sale after product and delivery costs, break-even ROAS is 1 ÷ 0.5 = 2x.
• If your margin is 25%, you need at least 4x just to break even.

Our jewellery brand has a 50% margin, so its 4x ROAS is comfortably profitable. The same 4x would only break even for a brand with 25% margins.

How to read them together

Think of the metrics as a chain: impression → click → conversion → revenue. When results drop, walk down the chain to find the weak link.

What you see	Likely cause	What to try
High CPM	Narrow audience or peak season	Broaden targeting, plan ahead for sales
Low CTR	Weak creative or wrong audience	Test new hooks, visuals and offers
Good CTR, high CPA	Website or offer problem	Check page speed, price and checkout
Good CPA, low ROAS	Low order value	Bundles, upsells, free-shipping threshold

Final thoughts

Don't chase one number. CTR and CPC help you improve ads. CPA and ROAS tell you if the business is healthy. And none of them matter if your tracking is wrong, so make sure your conversions are counted correctly first.

Sources

• Google Ads Help: Clickthrough rate (CTR)
• Google Ads Help: About target ROAS bidding