The short answer
- CPM is what you pay per 1,000 ad impressions; CPC is what you pay per click.
- They are linked by click-through rate: CPC = CPM / (1,000 x CTR). A $10 CPM at a 1% CTR is a $1.00 effective CPC.
- CPM billing wins when your CTR is above the break-even CTR, which is CPM / (1,000 x the CPC you would otherwise pay).
- Choose CPC when the click is the goal and your CTR is unproven; choose CPM for reach and awareness, or when strong creative gives you a reliably high CTR.
CPM vs CPC is a question about who carries the click-through risk. On CPM you pay for every impression whether anyone clicks or not. On CPC you pay only when someone clicks, so the platform carries the risk of a dull ad.
Both numbers describe the same auction from two angles. Once you know your CTR, you can convert one to the other and decide which billing model is cheaper for a given campaign.
CPM and CPC defined
| CPM | CPC | |
|---|---|---|
| Stands for | Cost per mille (cost per 1,000 impressions) | Cost per click |
| You pay when | Your ad is shown (or, with viewable CPM, shown in a viewable position) | Someone clicks your ad |
| Formula | (Cost / Impressions) x 1,000 | Cost / Clicks |
| Who carries the CTR risk | You. A low CTR raises your effective cost per click | The platform. A low CTR means fewer paid clicks |
| Typical use | Awareness, reach, video, retargeting with strong creative | Search, traffic and lead campaigns where the click is the goal |
CPM formula
CPM = (total cost / impressions) x 1,000
Spend $500 for 40,000 impressions and your CPM is ($500 / 40,000) x 1,000 = $12.50. Check your own numbers with the CPM calculator.
CPC formula
CPC = total cost / clicks
Spend $500 for 250 clicks and your CPC is $2.00. The CPC calculator does the same for any campaign.
Every campaign has both numbers, regardless of how it is billed. A CPC-billed search campaign still has an effective CPM; a CPM-billed video campaign still has an effective CPC. The billing model only decides which event triggers the charge.
The math that links CPM and CPC
CTR is clicks divided by impressions. Put that together with the two formulas and you get:
- CPC = CPM / (1,000 x CTR)
- CPM = CPC x CTR x 1,000
Write CTR as a decimal: 1% is 0.01. A $10 CPM with a 1% CTR gives $10 / (1,000 x 0.01) = $1.00 per click.
| CPM | CTR | Effective CPC |
|---|---|---|
| $10 | 0.5% | $2.00 |
| $10 | 1.0% | $1.00 |
| $10 | 2.0% | $0.50 |
| $20 | 0.5% | $4.00 |
| $20 | 1.0% | $2.00 |
| $20 | 2.0% | $1.00 |
The table shows why CTR matters more than the CPM itself. Doubling CTR halves your effective cost per click at the same CPM. If you need a refresher on what drives it, the CTR glossary entry covers it, and the CTR calculator computes it from raw clicks and impressions.
Break-even CTR: when CPM beats CPC
If a platform offers both billing models, compare them with the break-even CTR:
Break-even CTR = CPM / (1,000 x CPC)
Above that CTR, CPM billing is cheaper per click. Below it, CPC billing is cheaper.
Worked example
You can buy the same audience at a $15 CPM or a $2.50 CPC.
- Break-even CTR = $15 / (1,000 x $2.50) = 0.006, or 0.6%.
- If your ads get a 1.2% CTR on CPM billing, your effective CPC is $15 / (1,000 x 0.012) = $1.25. CPM billing halves your click cost.
- If your ads get a 0.3% CTR, your effective CPC is $15 / 3 = $5.00. CPC billing at $2.50 is half the cost.
One caveat. The prices are not fixed. The auction treats bids differently by billing type, and platforms that optimize delivery will show your ad to different people depending on what you pay for. Treat the break-even CTR as a starting estimate, then test both and compare cost per conversion, not cost per click.
When each billing model wins
CPC wins when
- The click is the goal. Traffic, lead and search campaigns exist to drive visits.
- Your CTR is unknown. New creative, new audience, new offer. CPC caps your downside while you learn.
- Your CTR is low and hard to raise. Narrow B2B audiences or text-only placements often fall below the break-even CTR.
- You are on search. On Google, search campaigns are bought per click; viewable CPM is not offered for Search Network only campaigns.
CPM wins when
- Reach is the goal. Awareness and video campaigns are judged on how many people saw the ad, not who clicked.
- Your CTR is reliably high. Proven creative to a warm audience, like retargeting past site visitors, often beats the break-even CTR.
- You want frequency control. Paying per impression makes it easy to reason about how often each person sees an ad.
- Clicks are not the conversion path. For video views or brand lift, a click-based price measures the wrong thing.
Neither, when you can optimize to conversions
Most platforms now let you bid toward a conversion goal, such as purchases or leads, while still charging per impression or per click. In that case the billing model matters less than the conversion event you optimize to and the quality of your conversion tracking. Judge the campaign on cost per acquisition and return on ad spend.
How the main platforms bill
| Platform | CPM billing | CPC billing |
|---|---|---|
| Google Ads Search | Not available; viewable CPM bidding is not offered for Search Network only campaigns | Yes. You pay for each click, and your max CPC is the most you will typically be charged |
| Google Ads Display and Video | Yes, viewable CPM: you pay per 1,000 impressions measured as viewable | Yes |
| Meta (Facebook and Instagram) | Yes, impressions is a charge option | Link clicks is a charge option for some objectives; available choices depend on the objective |
| Yes, manual bidding can charge by impressions | Yes, manual bidding can charge by clicks; it can also charge by sends or video views depending on format |
On Google, an impression counts as viewable when at least 50% of a display ad is on screen for one second or longer, or a video plays continuously for two seconds or longer. On Meta, new ad accounts may have to spend some amount billed on impressions before other charge choices become available, and the choices on offer always depend on the campaign objective.
Worked examples
Example 1: a prospecting campaign on Meta
A store runs a traffic campaign to a cold audience. Over a week it spends $1,400, earns 100,000 impressions and 800 link clicks.
- CPM = ($1,400 / 100,000) x 1,000 = $14.00
- CTR = 800 / 100,000 = 0.8%
- CPC = $1,400 / 800 = $1.75, which matches $14 / (1,000 x 0.008)
If the store could buy link clicks at $2.00 instead, the break-even CTR is $14 / 2,000 = 0.7%. The current 0.8% is above it, so impression billing is slightly cheaper per click, by $0.25. That gap is small enough that conversion rate after the click matters far more.
Example 2: a retargeting campaign
Retargeting site visitors usually costs more per impression because the audience is small. Assume a $30 CPM. Warm audiences also tend to click more; assume a 2.5% CTR.
- Effective CPC = $30 / (1,000 x 0.025) = $1.20
The high CPM looks expensive in a report sorted by CPM. Sorted by cost per click or cost per purchase, it is often the cheapest campaign in the account.
Example 3: a B2B awareness campaign
A LinkedIn campaign to a narrow audience runs at a $40 CPM and a 0.4% CTR. Effective CPC = $40 / 4 = $10.00. If manual CPC bidding would get comparable delivery for less than $10 a click, it is the cheaper choice for traffic. If the goal is reaching every decision maker at 200 target accounts, the CPM is the honest price of that reach.
Reading CPM and CPC in your own accounts
- Compare like with like. CPMs for search, display, video and social placements are not comparable. Compare within a placement type.
- Watch the trend, not the level. A rising CPM with a flat CTR means the auction got more expensive. A flat CPM with a falling CTR means the creative is wearing out.
- Diagnose with the formula. If CPC jumped, check whether CPM rose or CTR fell. The fix is different: audience and bid for the first, creative for the second.
- End at the conversion. Cheap clicks that do not convert are expensive. Cost per acquisition is the number that pays the bills.
Sprites analyzes CPM, CTR and CPC across your connected accounts and proposes any fix as an editable approval card, applied only after you approve it. That includes Google Ads, Meta ads, LinkedIn, Microsoft and Reddit, plus TikTok reporting.
Pull last month's CPM, CTR and CPC for your top three campaigns, compute each break-even CTR, and test the billing model on the one furthest from it.