In this article, we’ll cover the following Facebook ads metrics:
- CPC or Cost per Click
- CPM or Cost per Thousand Impressions
- CPA or Cost per Acquisition
- CPL or Cost per Lead
What does CPC mean?
CPC stands for cost per click. It’s essentially how much you are paying for a link click. The goal here is to know how many visitors are converting on your website so you can backtrack how much you should spend per click.
For instance, let’s say SH1FT converts 3 visitors per 100 visitors and each visitor brings you $30 in profits. This would mean that to break even, you would need to spend $90 to get 100 visitors. In other words, you would spend a maximum of $0.90 per click.
What does CPM mean?
In digital advertising, CPM stands for cost per mille. It’s the equivalent of the amount an advertiser pays to get one thousand impressions.
For example, your CPM could be $5. This would mean that to get your ad seen a 1,000 times, you would need to spend $5. Lower CPM’s are often linked to better results, but it’s not always the case. Make sure to track your revenue.
What does CPA mean?
Cost per action (CPA) is a digital advertising strategy that allows an advertiser to optimize his ads to get a specific action from the user. Running a CPA campaign is usually low risk since payment usually only happens when the action has been done by the consumer.
This is by far the most important metric because it can help you track the profitability of your ad spend. For instance, if you know a customer brings you $100 profit on average, then you can choose to spend $60 confidently to get him.
What does CPL mean?
CPL is a digital advertising metric that stands for “Cost Per Lead” which defines the cost a business pays to receive every online lead they receive.
A lot of B2B companies (such as SH1FT) use this to track the number of leads they receive. The important thing here is to know how much a lead brings you on average to track revenue.
For example, if for every 100 leads you get a client worth $10,000 in profit, then you can say that you are willing to spend $100 per lead. The only caveat is that lead quality varies a lot which could mess your metrics.
Does CPC matter?
CPC matters if you know your metrics to be profitable. Depending on your goal, some companies want to have the most visibility while others want to get sales fast. We believe both goals are important. A large brand might benefit more long term from visibility while smaller brands need to get profits in order to keep going.
For example, CPC might be a good metric for a large brand promoting to new audiences while a small brand might benefit from knowing what a click means in terms of profits.
For example, if they know that on 100 website visitors, 4 convert into customers and that each customer brings on average $40 of profits, then every click would be worth 4 times $40 divided by 100 which is $1.6. In this example, you would want to aim for clicks below to $1.6 to make profits.
Why would you choose CPC instead of metrics such as ROI? Well, you might not spend enough on an ad set to generate enough results in order to optimize. By having CPC, you’ll get enough results for Facebook to optimize your budget.
Does CPM matter?
CPM matters if you know your metrics to be profitable again. It’s a good metric if your only goal is to have your ad seen as many times as possible, but if your goal is profit, it might not be the right objective.
It could be a good objective if you know your metrics, such as CTR, which stands for click-through rate. It’s the number of people who click on your ad to see your website divided by the number of times your ad has been seen.
If you know what a click is worth to you, then you could find your profits based on the CPM.
For example, if a click is worth $1.6, meaning a click brings you $1.6 every time, and your CTR is 5%, this would mean that 1,000 impressions bring 50 clicks which is $80. Now you would be able to know that a CPM below $80 brings you profit.
The hard part here is that metrics like these on low ad spends vary a lot, big budgets tend to bring more stable metrics. This means you should use this metric only if you spend a large Facebook ad budget in our opinion or if your goal is to just get visibility but not track direct profit returns.
Does CPA matter?
CPA matters if you want to make profits. Although a lot of companies use CPA as “cost per action”, this action is most often acquisition. It’s the cost you pay for every customer.
If you know how much a customer is worth to you, then you can easily calculate if your advertising spends is profitable for you. It’s actually quite easy.
This metric is often one of the most important ones in digital advertising, especially small companies trying to scale.
Does CPL matter?
CPL matters if you have a business that needs leads. I know we could say that most businesses need leads, but certain B2B companies do work with leads that they contact for larger projects.
It’s a great metric to have combined with the lead to close ration and the average sale number. This way, we can tell what a lead is worth to you.
We recommend calculating these metrics based on the channel because they vary a lot. You could have one of organic traffic, one for Facebook ads and so on.
Most companies would say that they only care about profits, but sometimes focusing on visibility and popularity might be more profitable in the long run.
By knowing which metrics matter most and how you can calculate your profits, you will be able to run more profitable advertising.
Another way to improve your results is to stay up-to-date with Facebook ads. We update an article on that subject every month if you want to take a look!