1. CPM: cost per thousand impressions

CPM stands for cost per mille — "mille" is Latin for thousand — so it's what you pay for every 1,000 times your ad is shown (impressions), whether or not anyone clicks.

CPM = (total spend ÷ impressions) × 1,000

Spend $50 to be shown 10,000 times? Your CPM is ($50 ÷ 10,000) × 1,000 = $5. CPM is the natural metric for awareness campaigns, where the goal is eyeballs, not immediate clicks.

2. CPC: cost per click

CPC is what you pay each time someone actually clicks your ad.

CPC = total spend ÷ clicks

Spend $50 and get 25 clicks? Your CPC is $2. CPC is the metric for traffic and response campaigns — you're paying for people to come to your site. It varies enormously by industry and competition: WordStream's Google Ads cost research shows average CPCs ranging from a couple of dollars in low-competition niches to nearly $10 in fields like legal services. So a "good" CPC is entirely relative to your market.

3. ROAS: return on ad spend

ROAS is the one that tells you whether the whole thing was worth it: how much revenue you earned for every dollar spent on ads.

ROAS = revenue from ads ÷ ad spend

Spend $500 and earn $2,000? Your ROAS is 4, often written as 4:1 or 400% — $4 back for every $1 in. Google Ads describes it the same way in its Target ROAS documentation: a 500% target means aiming for $5 in conversion value per $1 spent. Unlike CPC and CPM, ROAS connects ads directly to money.

4. How they connect

These aren't competing metrics — they're a chain from spend to revenue:

  • CPM sets how cheaply you can get seen.
  • CPC reflects how cheaply those views turn into visits (driven by how compelling your ad is).
  • Conversion rate turns visits into sales.
  • ROAS is the result of the whole chain — what all that spend returned.

A great CPC with an awful landing page still produces a terrible ROAS. That's why you watch the chain, not one link.

Quick example $200 spend → 40,000 impressions (CPM $5) → 100 clicks (CPC $2) → 5 sales at $120 each = $600 revenue → ROAS 3:1. Improve the landing page so 10 of those clicks convert, and the same spend doubles to a 6:1 ROAS — no extra ad budget required.

5. Which metric actually matters

It depends on your goal, but for most small businesses spending to drive sales, ROAS is the metric that matters most — it's the only one denominated in money. CPC and CPM are diagnostic: they tell you where in the chain a problem is (expensive to be seen? expensive to earn a click?), but a healthy ROAS is the proof the campaign works. Just remember ROAS isn't the same as profit — it counts revenue, not margins — so know the break-even ROAS your margins require before you call a campaign a winner.

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To trust these numbers you need clean tracking — see what UTM parameters are — and once you know your numbers, decide where the money goes in how to allocate your ad budget.