CTR, CVR, CPC and ROI: Formulas and a Worked Example

Each metric measures one step of the funnel

A paid campaign moves people through a sequence: the ad is shown (an impression), some viewers click, some of those visitors convert by buying or signing up, conversions produce revenue, and revenue minus costs produces profit. Every common metric describes one link in that chain, which is why they cannot substitute for each other.

Click-through rate (CTR) measures how often an impression turns into a click. Conversion rate (CVR) measures how often a click or visit turns into a conversion. Cost per click (CPC) tells you what each click cost on average, and return on investment (ROI) tells you whether the whole effort made or lost money once costs are taken into account. Two related metrics fill the gaps: cost per acquisition (CPA) and return on ad spend (ROAS).

• CTR (%) = clicks / impressions x 100
• CVR (%) = conversions / clicks (or sessions) x 100
• CPC = ad spend / clicks
• CPA = ad spend / conversions
• ROAS (%) = revenue from ads / ad spend x 100
• ROI (%) = (profit - investment) / investment x 100

One campaign, every formula

Suppose a month-long campaign records 80,000 impressions, 1,600 clicks and 48 purchases, with total ad spend of 2,400. The average order value is 125 and the product carries a 40% gross margin. Amounts are in whatever currency you use; the ratios work the same way.

CTR is 1,600 / 80,000 x 100 = 2%. CPC is 2,400 / 1,600 = 1.50 per click, which is also 30 per thousand impressions (CPM). CVR, using clicks as the denominator, is 48 / 1,600 x 100 = 3%. CPA is 2,400 / 48 = 50 per purchase. A handy cross-check is that CPA equals CPC divided by CVR: 1.50 / 0.03 = 50.

Revenue is 48 x 125 = 6,000, so ROAS is 6,000 / 2,400 x 100 = 250%. That looks healthy, but gross profit at a 40% margin is only 2,400, exactly the amount spent on ads. ROI is therefore (2,400 - 2,400) / 2,400 = 0%. The campaign broke even: it paid for itself and nothing more.

Now imagine a landing-page improvement lifts CVR from 3% to 4% while traffic and spend stay the same. Purchases rise to 64, revenue to 8,000 and gross profit to 3,200. ROAS becomes about 333% and ROI becomes (3,200 - 2,400) / 2,400, roughly 33%. A single percentage point of conversion rate turned a break-even campaign into a profitable one, which shows how sensitive the bottom line can be to mid-funnel metrics.

• CTR: 1,600 / 80,000 = 2%
• CPC: 2,400 / 1,600 = 1.50
• CVR: 48 / 1,600 = 3%
• CPA: 2,400 / 48 = 50
• ROAS: 6,000 / 2,400 = 250%
• ROI: (2,400 - 2,400) / 2,400 = 0%

ROI versus ROAS

ROAS is built on revenue; ROI is built on profit. That distinction is why a campaign can show a ROAS well above 100% and still lose money. Revenue has to cover the cost of the goods sold before any of it is available to pay for advertising.

The break-even ROAS is 1 divided by the gross margin, times 100. At a 40% margin, break-even is 250%, which is exactly where the example landed. At a 25% margin it rises to 400%, and at 60% it falls to about 167%. Comparing ROAS across products with different margins without adjusting for this is one of the most common reporting mistakes.

Be aware, too, that ROI is not defined identically everywhere. The version used here subtracts the investment, so 0% means you recovered exactly what you spent. Some teams instead report profit divided by investment, under which the same break-even result would read as 100%. Whether fixed costs such as staff time, creative production or software are included also changes the figure. When two ROI numbers are compared, confirm they were calculated the same way.

Common ways to misread the numbers

Averaging percentages. If ad A earns 50 clicks from 1,000 impressions (5% CTR) and ad B earns 300 clicks from 60,000 impressions (0.5% CTR), the simple average of the two rates is 2.75%. The real combined CTR is 350 / 61,000, about 0.57%. To combine rates, add up the numerators and denominators first and divide once.

Mixing denominators. CVR can be calculated per click or per session. Ad platforms count clicks, while analytics tools count sessions, and the two rarely match because of tracking differences, repeat visits and blocked scripts. A conversion rate that jumps after a reporting change may simply have switched denominators.

Optimising one metric in isolation. A more provocative ad might double CTR, but if the extra clicks come from people with little intent, CVR falls and CPA rises. Since you pay per click, higher CTR with weaker visitors can increase spend without increasing sales. Judge changes by CPA, ROAS or ROI, not by CTR alone.

Reading small samples. With 50 clicks and 2 conversions, CVR is 4%, but one conversion more or less moves it to 6% or 2%. Wait for enough volume before declaring a winner, especially when comparing variants.

Running the numbers yourself

Each step can be checked with a dedicated calculator. The Click-Through Rate (CTR) Calculator also reports clicks per thousand impressions. The Conversion Rate (CVR) Calculator accepts sessions or clicks as the denominator and shows how many conversions you would need to reach target rates from 1% to 10% at your current traffic. The Cost Per Click (CPC) Calculator can estimate how many clicks a given budget should buy at your current CPC.

The ROI (Return on Investment) Calculator lets you enter profit directly or derive it from sales and cost of goods, and it also shows the return multiple and net profit. For the remaining links in the chain, the Cost Per Acquisition (CPA) and ROAS (Return on Ad Spend) calculators complete the picture from impression to profit.