PPC Metrics Explained: CPC, CTR, CPA and ROAS With Examples
Updated · By Robert Breen
The problem
Leo manages Google Ads for an online store that sells standing desks. Last month he spent $6,000, and his manager’s only question is "is it working?". The Google Ads dashboard shows twenty columns, and Leo is not sure which three matter.
What you’ll be able to do
You will be able to take any ad campaign’s spend, clicks and sales and work out CPC, CTR, CPA and ROAS by hand, explain in one sentence whether it is profitable, and know which number to improve first.
Leo’s month in one table
| Metric | Formula | Leo’s campaign |
|---|---|---|
| Impressions | Times an ad was shown | 150,000 |
| Clicks | Times an ad was clicked | 3,000 |
| CTR | Clicks / impressions | 3,000 / 150,000 = 2.0% |
| Spend | What Google charged | $6,000 |
| CPC | Spend / clicks | $6,000 / 3,000 = $2.00 |
| Conversions | Orders from ad clicks | 75 |
| Conversion rate | Conversions / clicks | 75 / 3,000 = 2.5% |
| CPA | Spend / conversions | $6,000 / 75 = $80 |
| Revenue | Order value from ad clicks | $27,000 (average order $360) |
| ROAS | Revenue / spend | $27,000 / $6,000 = 4.5x |
How the numbers connect
Each metric is a step in a chain. Impressions times CTR gives clicks. Clicks times CPC gives spend. Clicks times conversion rate gives conversions. Conversions times average order value gives revenue. So CPA is really CPC divided by conversion rate: $2.00 / 0.025 = $80.
That one line explains most campaign problems. If CPA is too high, either clicks cost too much (CPC) or too few clicks buy (conversion rate). They have different fixes, so find out which before changing anything.
Is it profitable? Break-even ROAS
A 4.5x ROAS sounds great, but ROAS uses revenue, not profit. Leo’s desks have a 40% gross margin, so each $360 order makes $144 before ad costs. To break even on ads, each dollar of spend needs $1 / 0.40 = $2.50 of revenue. That is the break-even ROAS: 2.5x.
At 4.5x, Leo’s ads are profitable. The $27,000 revenue gives $10,800 gross profit, and minus $6,000 spend that leaves $4,800. Put the other way, the most he can pay for one order and still break even is $144, and he pays $80.
Which lever to pull
| Symptom | Likely cause | First fix |
|---|---|---|
| Low CTR (under about 2% on search) | Ad text does not match what people searched | Tighter keyword groups, the keyword in the headline |
| High CPC | Competitive keywords or a low Quality Score | Longer, more specific keywords; improve ad relevance |
| Good CTR, low conversion rate | The page does not deliver what the ad promised | Match the landing page to the ad; shorten the form |
| Good CPA, low volume | Budget or bids are capping it | Raise budget in small steps and watch CPA |
Three traps
Comparing CTR across channels. Search ads often get 3% to 6% CTR; display and social ads often get well under 1%. Neither is "better"; they sit at different stages of the funnel.
Celebrating cheap clicks. A $0.40 CPC that never converts is worse than a $4 CPC that converts at 5%. Always carry the chain through to CPA or ROAS.
Trusting the platform’s conversion count blindly. Google and Meta each count conversions their own way and can both claim the same sale. Check total orders in your store against the sum the ad platforms report.
Check your understanding
A campaign spends $1,200 and gets 800 clicks. What is the CPC?
Show the answer
$1.50. $1,200 / 800 = $1.50 per click.
Spend is $2,000 and ad-driven revenue is $5,000. What is ROAS?
Show the answer
2.5x. ROAS = revenue / spend = $5,000 / $2,000 = 2.5x.
CTR is strong but almost nobody buys. Where is the problem most likely?
Show the answer
The landing page. People like the ad enough to click, then something on the page stops them. Make the page match the ad’s promise.
Products have a 25% gross margin. What is the break-even ROAS?
Show the answer
4x. 1 / 0.25 = 4. Below 4x ROAS, the ads lose money on each sale.
Terms in this lesson
Questions this lesson answers
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