Cost per acquisition (CPA)
Cost per acquisition (CPA) is the average amount an advertiser pays in ad spend for each conversion, such as a sale, lead or sign-up. It is calculated by dividing total advertising cost by the number of conversions. Google Ads calls it cost per action and reports it as cost per conversion.
How is CPA calculated?
Google defines average CPA as the total cost of conversions divided by the total number of conversions. A campaign that spends £2,000 and records 80 conversions has a CPA of £25.
The number is only as meaningful as the conversion behind it. A CPA based on newsletter sign-ups cannot be compared with one based on qualified sales leads, and an account that counts both in the same column will report a CPA that describes neither.
How does Target CPA bidding work?
Target CPA is a Smart Bidding strategy that sets bids to get as many conversions as possible at the average cost the advertiser chooses. Google says some conversions may cost more than the target and some less, and it tries to keep the average close to it.
Google recommends starting from the average CPA of the last 30 days, adjusted for conversion delays, and judging results over at least 30 days and 30 conversions. It advises against bid limits and separate ad group targets, because both restrict the strategy.
What is a good CPA?
There is no universal benchmark. The ceiling is what a customer is worth: the profit from the first sale, or from the expected lifetime of the customer if the business can measure repeat purchases reliably. A £90 CPA is expensive for a £60 product and cheap for a £5,000 contract.
Example
A B2B software company pays £60 per demo request. One demo in five becomes a customer, so the real cost of a customer is £300. Against an average first-year contract of £4,000, the business can afford a higher CPA, and the useful target is cost per customer rather than cost per form fill.
Related terms
Further reading
Our Pay Per Click service puts this into practice for brands in the UK and US.
