Basics · also called CPA, cost per action, cost per conversion
CPA (cost per acquisition)
CPA (cost per acquisition) is the average advertising cost of getting one desired action, such as a sale, sign-up or app install, and also a model paying only for those actions.
CPA answers a simple question: how much did it cost to get one customer (or one sign-up, one install, one lead)? The formula is CPA = total ad spend ÷ number of conversions. The "A" is sometimes read as "action" because the goal can be anything the advertiser defines.
CPA shows up in two ways. As a metric, it is a KPI that marketers compare against what a customer is worth (their LTV). As a pricing model, it is used by affiliate marketing programs and some networks that only get paid when a conversion happens. Platforms such as Google and Meta also offer "target CPA" bidding, where the algorithm adjusts bids to hit a chosen cost per conversion.
CPA is only as honest as the tracking behind it. Attribution rules decide which ad gets credit, and fraud such as cookie stuffing, lead generation fraud and attribution fraud exists precisely to steal credit for conversions that would have happened anyway, or never happened at all.
Think of it like this
CPA is like paying a recruiter only when a candidate is actually hired, rather than for every CV they send you.
An example
A fintech app in India spends ₹5,00,000 on ads and gets 2,500 verified sign-ups. CPA = 5,00,000 ÷ 2,500 = ₹200 per sign-up.
Related terms
Conversion
A conversion is a valuable action that an advertiser wants people to take after seeing or clicking an ad, such as a purchase, sign-up, app install, call or form submission.
ROAS (return on ad spend)
ROAS (return on ad spend) is the revenue generated by advertising divided by the money spent on that advertising, usually shown as a ratio like 4:1 or 400%.
Attribution
Attribution is the process of assigning credit for a conversion, such as a sale, sign-up or install, to the ads, channels or touchpoints that a customer encountered beforehand.
Affiliate marketing
Affiliate marketing is a performance-based arrangement where partners, such as publishers, bloggers, coupon or cashback sites and influencers, earn commission for sales or leads they refer to a merchant.
LTV (lifetime value)
LTV (lifetime value) is the total revenue or profit a business expects from a customer over their whole relationship, used to decide how much it can pay to acquire them.