Glossary
Paying for attention.
CPM is what a thousand ad impressions cost — the number the platforms actually bill you on. Clicks and orders are downstream of it.
effective CPC = CPM ÷ (1,000 × CTR)
CPM $20
CTR 1.5%
at a $20 CPM and 1.5% CTR, a click costs $1.33.
and at a steady two percent conversion rate, an order from this traffic costs $66.67 in ads.
How the meter actually runs
Every large ad platform — Meta, TikTok, YouTube, most of Google's display inventory — runs an auction for impressions. Whatever objective you pick in the campaign settings, the invoice is metered in thousands of views: a $20 CPM means twenty dollars buys your ad a thousand appearances in the feed, whether anyone touches it or not. Clicks are not what you buy; they are what you salvage. That is why the number your dashboard calls CPC is a derived figure — divide what you paid for the impressions by the clicks they produced, and you get the effective cost per click in the formula above. Orders sit one step further downstream, and so does ROAS.
Creative is the lever
Because the platform charges for attention rather than visits, the fastest route to cheaper clicks is not a lower bid — it is an ad more people want to click. Hold CPM at $20 and lift CTR from one percent to two, and effective CPC falls from $2.00 to $1.00: the platform charged you exactly the same, your creative simply salvaged twice as much from it. In practice it is better still, because the auctions reward high-CTR ads with cheaper impressions, so a strong creative cuts both terms of the formula at once. Rising CPMs are mostly weather — seasonality, competitors, election quarters — and largely out of your hands. Your CTR is the part of the equation you own, so spend your energy there.
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