The numbers that matter
Lesson 2 of 16 in the course “Marketing 2027”. Free, with animations and a quiz.
From impression to purchase
Last lesson Nika won the auction. Now let’s count whether it made money. Every ad follows one path: people see the ad, some of them click, some of those buy. Nika spent $100. The ad was shown 10,000 times, 100 people clicked, three bought, and each hoodie costs $50. Each step has its own number, and that number shows exactly where people drop off. There are five: CPM, CTR, CPC, CR and CPA. Sounds like a Wi-Fi password, but in two minutes you’ll read them like plain text.
CPM and CTR: attention and hook
CPM is the price of a thousand impressions. Nika paid $100 for 10,000 impressions, so her CPM is $10. It’s the price of attention: what it costs for a thousand people to see your ad. CTR is the share of people who clicked. 100 clicks out of 10,000 impressions is 1%. CTR answers whether the creative hooks: if people scroll past, CTR is low. Compare CTR with your own past ads and similar products: cheap trinkets and pricey tech have different normal CTRs, there’s no single “right” number.
CPC, CR and CPA: what a buyer costs
CPC is the price of one click: $100 / 100 clicks = $1. CR, or conversion rate, is the share of clickers who bought: 3 out of 100, so 3%. CR shows whether the site convinces: the page, price, photos, shipping, reviews. And CPA is the key number: what one purchase costs. $100 / 3 = about $33. Remember the link: CPA = CPC / CR. A $1 click with 3% conversion gives a $33 purchase. Raise conversion to 6% and a purchase drops to about $17 without changing the ad at all. Sometimes the best way to make ads cheaper is to fix the site.
ROAS: the pretty-number trap
ROAS is revenue divided by ad spend. Nika sold 3 hoodies for $150 and spent $100, so ROAS = 1.5. Looks like she’s up: put in 100, got 150. But revenue isn’t all profit. A hoodie costs Nika $20 to make, shipping another $5, so each sale leaves $25. Three hoodies bring $75 profit, and the ads cost $100. Result: minus $25. To break even, ROAS must be at least price divided by profit: $50 / $25 = 2.0. That’s called break-even ROAS. Work it out before launch, not after.
LTV: a customer is worth more than one sale
Remember Dollar Shave Club: they sold a $1-a-month subscription. One month brings in almost nothing, but the customer pays again and again. How much a person spends with you over time is called LTV, customer lifetime value. Say a customer buys her first hoodie from Nika and the ad eats the whole profit: minus $8. Six months later she comes back for a second hoodie without any ad, then buys a beanie. Total: +$32 from her. If you know your LTV, you can afford a first sale at zero or even a small loss. But LTV is counted from facts, not dreams: first check how many people actually buy again.
The numbers show where to fix
Each number points to its own breakdown. Low CTR: the creative doesn’t hook, you need a new hook or a new hero; we’ll do that in lessons 6–8. Normal CTR but low CR: the ad works and the site doesn’t. Check the page on a phone, the price, shipping, reviews. High CPM: impressions are expensive. Causes vary: a season like Black Friday when every advertiser bids more, complaints about the ad, or an audience that’s too narrow. The main rule: don’t touch everything at once. Find the weakest number, fix that one, and see what changes.
Do it yourself: a break-even calculator
Work out five lines for your product. The product price. The cost, including shipping and payment fees. Profit per sale: price minus cost. Break-even ROAS: price divided by profit. And max CPA: you can’t pay more than your profit per buyer, or every sale is a loss. For Nika that’s $50, $25, $25, 2.0 and $25. Now when the ad account shows a $33 CPA, you’ll know right away: too expensive, time to fix. Without these numbers, every stat in the ad account is just pretty digits.
Check yourself
- Is Nika making money?
Correct answer: No: she needs ROAS of 2.0 or more, and has 1.8. Profit per hoodie is $25 at a $50 price, so break-even starts at ROAS 2.0. At 1.8, every $100 of ads brings $180 revenue but only $90 profit: minus $10. - What should she fix first?
Correct answer: The site: the page, price, shipping. CTR is fine: people click, so the creative hooks. They leave on the site, where CR fell to 0.5%. That’s the breakdown: check the page on a phone, price, shipping and reviews. - What is Nika’s CPA?
Correct answer: $20. CPA = CPC / CR. A $0.40 click at 2% conversion: $0.40 / 0.02 = $20. So every purchase takes 50 clicks at $0.40. - When is a first sale at zero profit a sound plan?
Correct answer: When it’s proven that customers buy again. A zero-profit sale only pays off if the customer comes back, like Dollar Shave Club’s subscription or Nika’s second hoodie. First look at real repeat purchases, then risk your first-sale profit.
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