CPC stands for Cost Per Click. You pay only when someone clicks on your advertisement. The amount you pay per click is determined by an auction in which advertisers bid against each other for placement in the same targeting context. Google Search Ads operate primarily on a CPC model because the intent signal behind a search query makes the click the natural unit of value: someone clicked because they were interested enough to take action. The advantage of CPC is that you pay for demonstrated interest rather than passive exposure.
CPM stands for Cost Per Thousand Impressions. You pay based on how many times your advertisement is shown, regardless of whether anyone clicks. CPM pricing is common in display advertising, video advertising, and social media platforms like Facebook and Instagram when the campaign goal is awareness rather than direct response. If your goal is to put your brand in front of as many people in your target audience as possible, CPM often produces more exposure per dollar than CPC because you are paying for all impressions rather than only the fraction that results in a click.
CPA stands for Cost Per Acquisition, sometimes called Cost Per Action. You pay only when a specific outcome occurs: a purchase, a lead form submission, an app installation, or another defined conversion event. CPA pricing is effectively the end state of what all digital advertising optimizes toward, because it directly connects your advertising spend to a business outcome. Platforms like Facebook, Google, and Amazon can optimize toward CPA automatically when given enough conversion data to learn from. This makes CPA the most efficient model for campaigns with a clear conversion goal, but it requires enough conversion volume for the algorithm to optimize effectively.
The relationship between these three metrics is important to understand when evaluating campaign performance. A campaign with a low CPM might reach a large audience inexpensively but produce few clicks. A campaign with a low CPC might drive many clicks inexpensively but convert poorly to customers. Only CPA directly answers the question of whether your advertising spend is producing the outcome you care about. Working backward from your target CPA to the clicks and impressions required to produce it is the foundation of any advertising budget plan.
Platform selection affects which pricing model is most relevant. Google Search Ads are almost exclusively CPC because intent is high and clicks are the natural unit. YouTube and display advertising are typically CPM because brand visibility is the primary goal. Facebook and Instagram allow both CPC and CPM optimization depending on campaign objective. TikTok advertising began primarily as CPM and has evolved to support CPC and CPA objectives as its campaign tools have matured.
Every advertising investment should be evaluated against your target CPA: the maximum amount you are willing to spend to acquire a customer given their expected lifetime value. If your target CPA is fifty dollars and a campaign produces customers at thirty dollars, it is working. If the same campaign produces customers at ninety dollars, it is not working regardless of how low the CPM or how high the click-through rate might appear.