The numbers behind an ad campaign
Every ad platform reports the same chain: people see the ad (impressions), some click it, some of those buy or sign up (conversions), and the campaign brings in revenue. Each step has its own metric, and together they tell you where a campaign leaks money. This calculator turns five raw numbers into all of them and compares the result with the break-even ROAS for your gross margin.
The formulas
- CPM (cost per mille) = spend ÷ impressions × 1,000
- CTR (click-through rate) = clicks ÷ impressions
- CPC (cost per click) = spend ÷ clicks
- Conversion rate = conversions ÷ clicks
- CPA (cost per acquisition) = spend ÷ conversions
- ROAS (return on ad spend) = revenue ÷ spend
- Break-even ROAS = 1 ÷ gross margin
- Profit after ads = revenue × gross margin − spend
Worked example
An online store spends $1,000, gets 200,000 impressions, 3,000 clicks and 90 orders worth $4,500. Its gross margin is 40%.
- CPM = 1,000 ÷ 200,000 × 1,000 = $5.00; CTR = 3,000 ÷ 200,000 = 1.5%.
- CPC = 1,000 ÷ 3,000 = $0.33; conversion rate = 90 ÷ 3,000 = 3%.
- CPA = 1,000 ÷ 90 = $11.11 per order.
- ROAS = 4,500 ÷ 1,000 = 4.5. Break-even is 1 ÷ 0.40 = 2.5, so the campaign earns 4,500 × 0.40 − 1,000 = $800 of gross profit after ads.
Why break-even ROAS matters
A ROAS of 2 sounds good, since every dollar brings back two. But if your margin is 40%, those two dollars of sales leave only 80 cents of gross profit, so you lose 20 cents per dollar of ads. The break-even ROAS for common margins:
| Gross margin | Break-even ROAS |
|---|---|
| 20% | 5.0 |
| 30% | 3.3 |
| 40% | 2.5 |
| 50% | 2.0 |
| 70% | 1.4 |
Reading the results
- High CPM, normal CTR: the audience is expensive or the competition is fierce. Broaden targeting or test other placements.
- Low CTR: the creative or the offer does not stand out. Average search ads are well above display ads, so compare like with like.
- Good CTR, low conversion rate: the problem is the landing page, the price or the checkout, not the ad.
- ROAS above break-even but rising CPA: watch the trend; returns usually fall as you raise the budget.
ROAS ignores repeat purchases. If customers come back, compare the CPA with their lifetime value rather than with the first order alone.