You quote them in every status call: ROAS, CPA, conversion value. A client asks whether a 3.2 is good, and you nod rather than explain. This guide takes the three numbers apart so you know what each measures, how it is built, and how to set a target you can defend. If you are new to the platform, start with our Google Ads reporting for beginners guide and come back here.
Start with conversion value
Everything else is built on conversion value. A conversion is a desired action: a purchase, a form submission, a phone call, a signup. Conversions as a metric is the count of those actions. Conversion value is the revenue or worth you attach to them.
That value comes from one of two places. For ecommerce, it is the actual transaction revenue passed back from the website or store (the order total). For lead generation there is no transaction, so you assign a fixed value per action: maybe $40 for a quote request, $5 for a newsletter signup, based on how much a lead is worth to the business.
Garbage value in means garbage ROAS out. If your assigned lead value is a guess, every ROAS figure downstream is a guess too. Pin the value to something real, such as average deal size multiplied by close rate, before you report on it.
ROAS: return on ad spend
For every dollar spent, how many dollars of value came back?
- ROAS = conversion value ÷ cost
It is a ratio, not a currency figure. A ROAS of 4.0 means $4 of value for every $1 of spend. Some platforms show it as a percentage, so 4.0 becomes 400%. ROAS is the right lens when conversions carry real, variable revenue, which is why ecommerce reporting leans on it. For accurate revenue, your Google Ads and GA4 connection must track transactions cleanly.
CPA: cost per acquisition
CPA (cost per acquisition, also called cost per conversion) answers a different question: what did one conversion cost?
- CPA = cost ÷ conversions
CPA is a currency figure, and unlike ROAS, lower is better. A $22 CPA beats a $35 CPA. It is the natural lens for lead generation, where each conversion is worth roughly the same and there is no per-order revenue to compare. If every lead is worth about the same, the only variable is what you paid for it.
How the two relate
ROAS and CPA are two lenses on the same efficiency. With average order value (AOV), you can derive one from the other:
- ROAS = AOV ÷ CPA
If your AOV is $80 and your CPA is $20, your ROAS is 4.0. Push CPA down to $16 and ROAS climbs to 5.0. They move together because both are built from cost, value and conversion count.
ROAS and CPA describe the same efficiency, one as a ratio and the other as a price.
Setting sensible targets
A number means nothing without a target, and targets come from margin, not gut feeling.
For ROAS, start at break-even:
- Break-even ROAS = 1 ÷ gross margin
If your gross margin is 50%, break-even ROAS is 2.0 (1 ÷ 0.5). Below 2.0 you lose money on ads; above it you profit. Set the target above break-even to leave room for overheads and profit, say 3.5.
For lead gen, work backwards from value and the margin you want to keep:
- Target CPA = conversion value × target margin
If a lead is worth $100 and you want to keep 40% as margin after ad cost, your target CPA is $40. Spend more than $40 per lead and the maths stops working.
The weighted-total trap
This mistake breaks reports without anyone noticing. When you roll campaigns up to an account total, never average the campaign-level ratios. Recompute from the underlying totals:
- Account ROAS = total value ÷ total cost
- Account CPA = total cost ÷ total conversions
A tiny campaign with a 12.0 ROAS and a large campaign with a 2.0 ROAS do not average to 7.0. Weighted by spend, the real account ROAS sits close to the large campaign. Averaging ratios overstates performance, sometimes badly.
The three at a glance
| Metric | Formula | What good looks like / when to use |
|---|---|---|
| Conversion value | Transaction revenue, or a fixed value per action | The foundation. Must be real. Drives ROAS. |
| Conversions | Count of desired actions | Volume. Pairs with cost to give CPA. |
| ROAS | conversion value ÷ cost | Higher is better. Best for ecommerce. Target above break-even (1 ÷ margin). |
| CPA | cost ÷ conversions | Lower is better. Best for lead gen. |
In Clearly
In a client report, show ROAS or CPA next to its target, not in isolation. A scorecard reading 3.1 against a 3.5 goal tells the client more than a bare 3.1, because it says whether you are ahead or behind, not just where you landed.
Roll-ups are computed the right way: account-level ROAS and CPA are derived from total value, total cost and total conversions, so the weighted total is correct by default. The headline number matches what you would get by hand from the raw spend and value.
The short version
Conversion value is what an action is worth. ROAS (value ÷ cost) is the ratio lens, best for revenue. CPA (cost ÷ conversions) is the price lens, best for leads, and lower wins. Targets come from margin, and totals come from summing the inputs, never from averaging the ratios. Get those four habits right and the next status call gets easier.