The formula
CPA = spend / purchases (or conversions)Max CPA = contribution per orderAn Acme Watches ad spends $2,400 and drives 60 purchases, so CPA is 2,400 / 60 = $40. With $45 of contribution per order, each sale clears $5 before fixed costs. A second ad at a $52 CPA loses $7 on every order it brings in.
Why it matters
CPA ties ad spend to one outcome, which makes it easy to compare against what an order is worth. It ignores order size, though, so an ad that sells cheap add-ons can win on CPA and lose on profit. Use CPA when order values are similar, and ROAS or POAS when they are not.
How to improve it
Lower CPA by improving the path from click to purchase as much as the ad: faster pages, a clear offer, a landing page that matches the ad's angle. On the ad side, a stronger hook and a clearer offer usually lift conversion more than small audience tweaks.