Traction: How Any Startup Can Achieve Explosive Customer Growth

by Gabriel Weinberg

Click-Through Rate (CTR)—the percentage of ad impressions that result in clicks to your site. For example, if one hundred people see your ad and three of them click on it, you have a CTR of 3 percent (3/100). Cost per Click (CPC)—the amount it costs to buy a click on an advertisement. CPC is the maximum amount you’re willing to pay to get a potential customer to your site. Cost per Acquisition (CPA)—CPA is a measure of how much it costs you to acquire a customer, not just a click. For example, suppose you buy clicks at $1 and 10 percent of the people who hit your site after clicking on your ad make a purchase. This puts your CPA at $10: CPA = $1/10% = $10. You are paying $10 to acquire each customer. The 10 percent in this equation is known as the conversion percentage, which is the rate at which people “convert” by taking the action you want (in this case making a purchase). For paid search in particular this measure is calculated with the following formula: CPA = CPC / conversion percentage.