Module 4 · Paid campaigns and the honest report Lesson 11 of 15
Reading cost per click and conversion
Clicks are cheap and worthless on their own. Cost per SIGN-UP is the number that decides whether a campaign continues.
The concept
Three numbers tell you whether an ad works. CPC — what a click cost. Conversion rate — of 100 clicks, how many did the thing. Cost per conversion — the spend divided by the conversions, which is the only number that compares against the value of what you are giving away.
Work backwards from the money: if a genuine enquiry is worth ₹500 to you, then 200 clicks at ₹10 with a 2 per cent conversion rate gives four enquiries at ₹500 — exactly break-even, before any of the value of the fourth. If your ad is at ₹40 a click, it can only work with a much better conversion rate or a much better landing page.
CPC Rs.10 . 200 clicks . 2% convert = 4 enquiries
Cost per enquiry = (200 x 10) / 4 = Rs.500
If an enquiry is worth Rs.500, this breaks even - before its extra value.
At Rs.40/click you need a far better conversion rate or landing page.
Judge by cost per CONVERSION, not click-through rate.Common mistakes
The mistake is judging an ad by its click-through rate. A beautifully written ad that brings curious clicks and no conversions is worse than a plain one that brings fewer, better people. Judge by cost per conversion and by whether the person stayed.
Worked example
100 clicks at ₹5 with no sign-ups is ₹500 wasted; 20 clicks at ₹25 with 4 sign-ups is ₹125 per sign-up and worth scaling.
Your practice task
Calculate cost per click and cost per conversion for your test, and write one sentence on whether you would scale it.
Do this before moving on. Reading a solution teaches the shape of it; typing it teaches you.
Key takeaway
Three numbers tell you whether an ad works.
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