Money & metrics · also called cost per action, cost per conversion, cost per result
CPA (cost per acquisition)
CPA is the average amount spent on advertising to produce one conversion, calculated as ad spend divided by the number of conversions.
CPA answers "what did each result cost me?". The result is whatever the advertiser defines as a conversion: a sale, a sign-up, a quote request.
In search arbitrage the term is used at two points in the chain, and it helps to keep them apart. For the arbitrageur, the "acquisition" is a small step inside their own funnel, commonly a click on a related search term or on a feed ad, because that is the event reported back to the ad platform for optimisation. Their CPA is spend divided by those events, and it must stay below the revenue each event brings.
For the advertiser at the end of the chain, CPA is the cost of a real customer. They paid the search engine for a click that came through the arbitrageur's page. If those clicks rarely become customers, the advertiser's CPA on partner traffic rises, they bid less or exclude the site, and the arbitrageur's RPC falls. The advertiser's CPA is, in the end, what decides the arbitrageur's income.
An example
Say $200 buys 1,000 visits and 270 of them click a feed ad. The arbitrageur's CPA per ad click is $200 / 270 = $0.74. If each ad click earns $1.00, there is a $0.26 margin per conversion.
Related terms
Target CPA (tCPA)
Target CPA is an automated bid strategy where the platform sets bids to win as many conversions as possible at an average cost you specify.
Conversion
A conversion is a visitor completing the action a campaign was built to achieve, such as a purchase, a sign-up or a click on a paying ad.
Conversion rate (CVR)
Conversion rate is the percentage of visitors or clicks that go on to complete a desired action, such as a purchase, sign-up or enquiry.
Advertiser conversion
An advertiser conversion is the valuable action, such as a sale or lead, completed on the advertiser's own site after someone clicked their ad on a search feed.
CPC (cost per click)
CPC is the price paid for one click on an ad; in search arbitrage it is what the arbitrageur pays a traffic source for each visitor.
ROAS (return on ad spend)
ROAS is revenue divided by advertising spend, usually shown as a percentage or multiple; 100% (1.0x) means the ads exactly paid for themselves.