Google Ads
Click-through rate, CPC and CPM formulas
The three core ad efficiency formulas are click-through rate (CTR) = clicks ÷ impressions × 100, cost per click (CPC) = ad cost ÷ clicks, and cost per thousand impressions (CPM) = ad cost ÷ impressions × 1,000. They show how well your ads attract clicks and what that attention costs. None of them shows whether the ads make money.
The click-through rate formula, plus CPC and CPM
CTR % = Clicks ÷ Impressions × 100 CPC = Ad cost ÷ Clicks CPM = Ad cost ÷ Impressions × 1,000
- Impressions
- how many times your ad was shown
- Clicks
- how many times it was clicked
- Ad cost
- what you spent in the same period
| Metric | Measures | Use it to |
|---|---|---|
| CTR | How often people who see the ad click it | Judge ad and product relevance, titles and images |
| CPC | What each click costs | Compare with what a click is worth to you |
| CPM | What 1,000 impressions cost | Compare reach costs, mainly for display and video |
Worked example: a Shopping campaign
Worked example: one month of Shopping adsExample numbers
| Input | Value |
|---|---|
| Impressions | 50,000 |
| Clicks | 900 |
| Ad cost | $720 |
| Orders | 20 |
| Revenue | $1,500 |
| Gross margin | 45% |
- CTR = 900 ÷ 50,000 × 100 = 1.8%
- CPC = $720 ÷ 900 = $0.80
- CPM = $720 ÷ 50,000 × 1,000 = $14.40
- Conversion rate = 20 ÷ 900 = 2.2%
- ROAS = $1,500 ÷ $720 = 2.08
Why good CTR and CPC say nothing about profit
The campaign above has a healthy-looking CTR and an $0.80 CPC. But:
- Gross profit from the sales = $1,500 × 45% = $675
- Ad cost = $720
- Result after ads = −$45
Break-even ROAS at a 45% margin is 1 ÷ 0.45 = 2.22. This campaign's ROAS of 2.08 is below it, so it's losing money despite good click metrics.
To judge a campaign, follow the chain all the way through:
Revenue = Clicks × Conversion rate × AOV Profit after ads = Revenue × Gross margin − Ad cost
What a click is worth to you is conversion rate × AOV × gross margin: here 2.2% × $75 × 45% ≈ $0.75, while each click costs $0.80.
Ad Profit Leak ScoreHow much of your Google Ads spend is actually profitable, banded 0–100.How to use these metrics
- Use CTR to improve the ad, not to judge profitability: better titles, images and prices raise it.
- Compare CPC with what a click is worth: conversion rate × AOV × margin.
- Use CPM for awareness campaigns on YouTube and display, where clicks aren't the main goal.
- Make final decisions on profit: ROAS against break-even, or POAS. See the guide to ROAS.
Related metrics
| Metric | Formula |
|---|---|
| Conversion rate | Conversions ÷ Clicks × 100 |
| CPA (cost per acquisition) | Ad cost ÷ Conversions |
| ROAS | Revenue ÷ Ad cost |
| Break-even ROAS | 1 ÷ Gross margin |
For typical cost-per-click levels and how to budget, see how much Google Ads cost. To estimate how many orders a customer needs to pay back their acquisition cost, try the CAC payback calculator.
FAQ
What is the formula for CTR?
CTR = clicks ÷ impressions × 100. If an ad is shown 50,000 times and clicked 900 times, the CTR is 1.8%.
What is cost per click (CPC)?
The average amount you pay each time someone clicks your ad: total ad cost divided by clicks.
What's the difference between CPC and CPM?
CPC is the cost per click. CPM is the cost per thousand impressions. Search and Shopping ads are usually bought per click; some display and video campaigns are measured or bought per thousand impressions.
What is a good CTR?
It varies a lot by campaign type, position and industry. More useful than any benchmark is comparing your own ads and products against each other, and checking that higher CTR comes with profitable sales.