Cost per click and cost per thousand impressions are the two ways online advertising is priced, and they are two views of the same three numbers: how often the ad was shown, how often it was clicked, and how much you paid.
Fill in any combination below and the calculator derives everything it can. Enter spend and clicks to grade a campaign that ran. Enter a budget, a target cost per click, and an expected click-through rate to size one that has not.
What CPC and CPM actually measure
Cost per click is what you pay for one visit. It is the price of an outcome, and the outcome is someone actively choosing to come to you.
Cost per thousand impressions, written CPM after the Latin for thousand, is what you pay to be seen a thousand times. It is the price of exposure, whether or not anyone acts on it.
The choice between them is a choice about who carries the risk. Under CPC, the publisher only gets paid if the ad works well enough to earn a click, so the advertiser is protected from bad creative and bad targeting. Under CPM, the advertiser pays for delivery regardless, so the publisher has certainty and the advertiser carries the performance risk.
That is the whole trade, and it explains where each model shows up. Direct response advertising runs on CPC. Brand and awareness advertising runs on CPM, because exposure is the objective rather than a step towards one.
The formulas
CPC = Total cost ÷ Clicks
CPM = (Total cost ÷ Impressions) × 1,000
And the bridge between them, which is the part worth memorising:
CPC = (CPM ÷ 1,000) ÷ (CTR ÷ 100)
CPM = CPC × (CTR ÷ 100) × 1,000
Click-through rate is what connects the two. A CPM buy has an implied cost per click that depends entirely on how well the ad performs, and a CPC buy has an implied CPM that depends on the same thing. Neither price is comparable to the other without it.
The three underlying quantities are impressions, clicks, and spend. Everything else is a ratio between two of them, which is why the calculator can work forwards, backwards, or sideways from almost any combination.
Two worked examples
Grading a campaign that ran. You spent $285 and received 190 clicks from 10,000 impressions.
CPC = $285 ÷ 190 = $1.50
CTR = 190 ÷ 10,000 = 1.9%
CPM = ($285 ÷ 10,000) × 1,000 = $28.50
Three numbers describing one campaign. The $28.50 CPM is the figure to carry into any negotiation with a publisher selling on impressions, because it is what you are effectively already paying.
Sizing a campaign that has not. You have $5,000, expect to pay $2.50 a click, and your ads historically run at a 1.2% click-through rate.
Clicks = $5,000 ÷ $2.50 = 2,000
Impressions = 2,000 ÷ 0.012 = 166,667
CPM = ($5,000 ÷ 166,667) × 1,000 = $30.00
Now you know whether the audience is even large enough. If the segment you are targeting cannot deliver 167,000 impressions in the period, the plan does not work at that click-through rate, and no amount of budget fixes it.
Comparing a CPM buy against a CPC buy
This is where the conversion earns its keep. A publisher offers you a $12 CPM. A network offers you a $1.80 CPC. Which is cheaper?
It depends entirely on click-through rate, and the break-even is straightforward:
Break-even CTR = CPM ÷ (CPC × 1,000) × 100
At a $12 CPM against a $1.80 CPC, the break-even click-through rate is 0.67%. Above that, the CPM deal is cheaper per click. Below it, the CPC deal wins.
Which means the decision is really a forecast about your own creative. Buy on CPM when you are confident of performing above the break-even rate, because you keep all the upside from a good ad. Buy on CPC when you are not, because the publisher absorbs the downside from a bad one.
Where these metrics mislead
Neither one measures value. A $0.30 click from an audience that never buys is worse than a $6.00 click from one that does. Cost per click is a cost metric, and cost metrics rank badly against outcome metrics.
Optimising for a low CPC degrades quality. Broad targeting and cheap inventory reduce cost per click reliably and reduce conversion rate at the same time. The campaign gets cheaper and worse.
Impressions are not people, and not all are seen. An impression is a delivery, not a viewing. Viewability standards exist precisely because a large share of served impressions are never actually in view.
Published benchmarks are close to meaningless. Cost per click varies by an order of magnitude between industries, keywords, geographies, and platforms, because it is set by auction against whoever else wants the same audience. An average across all advertisers describes nobody.
Auction prices move with competition, not with your performance. A rising cost per click often means a competitor raised their bids. Nothing about your campaign changed.
CPC, CPM, CPA, and ROAS
Metric | What you pay for | Who carries the risk |
|---|---|---|
CPM | A thousand impressions | The advertiser |
CPC | A visit | Shared |
CPA | An acquisition | The publisher |
ROAS | Nothing, it is a result | Neither, it measures the outcome |
Read down that list and you are watching risk transfer from advertiser to publisher, with the price rising at every step. Cost per acquisition looks expensive per unit precisely because you only pay when the thing you actually wanted happened.
The practical sequence is to plan in CPM, buy in CPC, judge in CPA, and report in ROAS. Each one answers the question the previous one leaves open.
How operators actually work with these numbers
Convert every quote to the same unit before comparing. A CPM offer and a CPC offer are not comparable until one has been converted using an honest click-through rate.
Improve click-through rate rather than bidding down. A better rate lowers effective cost per click without touching the bid, and on auction platforms it usually lowers the bid required as well.
Track cost per click alongside conversion rate, always. Falling cost per click with falling conversion rate is a downgrade in traffic quality wearing the costume of an efficiency gain.
Separate branded from non-branded. Branded search is cheap and mostly captures demand you already had. Blending it into the average makes acquisition look far more efficient than it is.
Set a maximum cost per click from unit economics. Work back from what a customer is worth, through your conversion rate, to the most a click can cost. That number is the bid ceiling, and it is the only defensible one.
Further reading from Revenue Memo
FAQs
How do I calculate CPC?
Divide the total cost of the campaign by the number of clicks it produced. Spending $285 for 190 clicks gives a cost per click of $1.50.
How do I calculate CPM?
Divide the total cost by the number of impressions, then multiply by 1,000. A $20 campaign delivering 10,000 impressions has a CPM of $2.00.
How do I convert CPM to CPC?
Divide the CPM by 1,000 to get the cost of one impression, then divide that by the click-through rate expressed as a decimal. A $28.50 CPM at a 1.9% click-through rate works out to $1.50 per click.
What is the difference between CPC and CPM?
CPC charges for clicks, so you only pay when someone acts. CPM charges for impressions, so you pay for delivery whether or not anyone acts. CPC shifts performance risk to the publisher, and CPM keeps it with the advertiser.
Which is better, CPC or CPM?
Neither is inherently better. CPM is cheaper per click when your ads outperform the break-even click-through rate, which is the CPM divided by the CPC you would otherwise pay. CPC is safer when performance is unproven, because you pay nothing for impressions that do not convert into visits.
What is a good CPC?
There is no useful universal figure, because cost per click is set by auction and varies enormously by industry, keyword, and platform. The number that matters is your maximum acceptable cost per click, which you calculate from what a customer is worth and how many clicks it takes to get one.
How do I work out how many impressions I need?
Divide your click target by your expected click-through rate. Needing 2,000 clicks at a 1.2% rate requires roughly 167,000 impressions. The calculator above will do this from a budget and a target cost per click.