[Blog]Measurement
Cost per lead vs CAC: what to measure in Google Ads
Google Ads reports cost per conversion; your board asks about CAC. What each number means, why they disagree, and how to connect leads to revenue.
Key takeaways
- Cost per lead is ad spend divided by leads; CAC is everything you spend to win customers divided by the customers you won.
- Google Ads only knows the conversions you send it, usually the form fill, not the deal.
- Cheap leads can be expensive customers, so judge campaigns by qualified leads and pipeline when you can.
- Send CRM stages back to Google Ads as conversions, with values, so the account learns what a good lead looks like.
- Work backward from the CAC you can afford to the cost per lead you can pay.
Cost per lead is what you spend on ads divided by the leads they bring. CAC, customer acquisition cost, is everything you spend to win customers, divided by the customers you won. Google Ads shows the first, your board asks for the second, and they often disagree, because Google Ads only knows about the conversions you send it. Measure cost per lead to run the account; connect your CRM to judge it by customers.
What Google Ads calls a conversion
In Google Ads, a conversion is whatever action you tell it to count: a demo request, a trial signup, a call. Cost per conversion is your cost divided by those conversions. When the only conversion is the form on your landing page, cost per conversion is your cost per lead.
That makes the number fast and specific. You can see it by campaign, ad group and keyword, and it reacts within days when you change something. It also means Google Ads can’t tell a lead your sales team loves from one they reject. Both count as one conversion.
What CAC includes
CAC is a business number, not an ad number. For a period, add up what you spent to win new customers and divide by the customers you won:
- Ad spend, on every channel.
- Salaries and commissions of the people in sales and marketing.
- Tools, agencies and contractors.
Many teams track two versions: a blended CAC with every cost and every new customer, and a paid CAC with only paid channels and the customers they brought. Either way, it’s measured in customers, not leads, and it lags: a lead from this month may close next quarter.
Why the two numbers disagree
Cost per lead and CAC move apart for a few predictable reasons:
- Not every lead is a buyer. Students, job seekers, competitors and companies too small to buy all fill in forms.
- Some searches bring many leads and few customers. A broad, cheap search can lower cost per lead and raise CAC at the same time.
- Sales cycles take time. This month’s leads become next quarter’s customers, so the two numbers describe different months.
- CAC carries costs Google Ads never sees. Salaries, tools and agency fees don’t appear in the ad account.
So a campaign that looks best by cost per lead can be the worst by CAC. The fix isn’t to stop measuring cost per lead. It’s to teach the account which leads matter.
How to connect leads to revenue
The link between an ad click and a closed deal is the click itself. With auto-tagging on, Google Ads adds a click ID (the GCLID) to the address of every ad click. Save it with the lead when the form is sent, and you can tell Google Ads later what happened to that lead.
There are two common ways to send that back:
- Offline conversion import: when a lead reaches a stage that matters, such as qualified, meeting held or won, send Google Ads its click ID, the conversion and the time. Some CRMs can do this through a built-in integration; a file upload or a tool like Zapier works too.
- Enhanced conversions for leads: instead of the click ID, Google Ads matches hashed lead details, such as the email address, to the ad click.
Import the stages that predict revenue, and give each one a value: a qualified lead is worth more than a form fill, a won deal more than a meeting. Then the account sees which searches bring value, not just volume.
Bidding on value
Once Google Ads receives stages with values, you can bid for value instead of volume, with strategies such as Maximize conversion value or a target return on ad spend. These strategies need enough conversion data to work with; check Google’s guidance for the strategy you choose before you switch, and keep watching qualified leads, not only conversions, while it learns.
If you aren’t ready to change bidding, the imported stages still help you decide. A report of cost per qualified lead by campaign and keyword is often enough to see which searches to exclude and which deserve their own landing page.
A practical setup
- Track three stages: the lead, the qualified lead and the customer. Count only the first as the primary conversion until the others have data.
- Save the click ID with every lead, in your CRM, from the day you start.
- Report cost per lead weekly by campaign, ad group and keyword, and act on it.
- Report cost per qualified lead and paid CAC monthly, and check last month’s decisions against them.
- Work backward from CAC: the cost per lead you can afford is your target CAC multiplied by the share of leads that become customers.
Where Hyperdesk fits. Hyperdesk shows spend, leads and cost per lead by campaign, ad group, keyword and page, for the last 7 or 30 days. Every lead from your Hyperdesk landing pages arrives with the search, the ad and the page behind it, goes on to HubSpot or any tool through a webhook, and can be sent back to Google Ads as a conversion with its value. See how leads work in Hyperdesk, or how it compares with hiring a performance marketer.
Questions
What is a good cost per lead?
One that fits your CAC. Multiply the CAC you can afford by the share of leads that become customers; that’s the most you can pay per lead from ads before other costs. It changes with deal size and close rate, so there’s no universal good number.
Should we optimize Google Ads for cost per lead or for CAC?
Use cost per lead to steer the account week to week, because it’s fast and specific. Check the decisions against qualified leads and customers every month, because that’s what CAC rewards.
Do we need a developer to send CRM stages back to Google Ads?
Not always. Google Ads can import conversions from some CRMs directly, from a file, or through tools like Zapier. What you need in every case is the click ID or the lead’s details saved with each lead.
Why does Google Ads show more conversions than our CRM has leads?
Usually because of how conversions are defined and counted. Several actions may count as conversions, one person can convert more than once, and conversions are reported on the date of the click. Check which actions are set as primary.
Published . Questions or corrections: contact@hyperdesk-ai.com.
