Beyond CTR and CVR, advertisers track a family of cost and return metrics. Cost per click (CPC) is spend divided by clicks. Cost per mille (CPM) is the cost per one thousand impressions, calculated as (spend divided by impressions) multiplied by 1000. Cost per acquisition or action (CPA) is spend divided by conversions. Return on ad spend (ROAS) is revenue attributed to ads divided by ad spend. Importantly, ROAS is not the same as return on investment (ROI): ROAS uses revenue and excludes non-ad costs, while ROI accounts for profit or net return after all costs, so a campaign can be ROAS-positive but unprofitable once product costs are included.
Two metrics connect advertising to the broader business: customer lifetime value (LTV) and customer acquisition cost (CAC). LTV is the expected gross margin or revenue from a customer over the entire relationship with the business, while CAC is the total acquisition spend divided by new customers acquired, with both the cost scope and time window defined clearly. For a paid channel to be sustainable, LTV should meaningfully exceed CAC. The break-even ROAS is the ratio of revenue to ad spend required to cover the cost of goods and variable costs; in revenue-based form, it is often expressed as 1 divided by the contribution margin.
Understanding what drives CPA is central to optimization. At a high level, CPA approximates CPC divided by CVR, or equivalently CPM divided by (CTR multiplied by CVR). Lowering CPA therefore depends on either reducing CPC or CPM, or improving CTR and CVR. Two related audience metrics are reach, the number of unique people or devices exposed to an ad, and frequency, the average number of times each person or device sees the ad over a period. Frequency caps limit how often a person sees an ad, which reduces waste, manages creative fatigue, and improves the efficiency of reach.