Break-even CPC (Cost Per Click) in digital marketing is the maximum amount you can afford to pay for a click on your ad without losing money. It’s calculated by determining the value of each click based on your conversion rate and the profit generated per conversion.

Formula:

Break-even CPC = Conversion Rate × Profit Per Conversion

Conversion Rate: The percentage of clicks that turn into conversions (e.g., purchases, sign-ups).

Profit Per Conversion: The revenue from each conversion minus the costs associated with fulfilling it.

Example:

Product price: $50

Cost to produce and ship the product: $30

Profit per conversion: $50 - $30 = $20

Conversion rate: 5% (or 0.05)

Break-even CPC = 0.05 × 20 = 1

This means you can afford to pay $1 per click to break even.

If your actual CPC is lower than $1, you’ll make a profit. If it’s higher, you’ll lose money.