ROAS (return on ad spend)
Also called return on ad spend, ROAS
What are ROAS?
ROAS, or return on ad spend, measures how much revenue an ad campaign brings in for every dollar spent on it. It is calculated as revenue from ads divided by ad spend. If $500 of ads produces $2,000 in sales, ROAS is 4, often written as 4x or 400%. It is a core metric for ecommerce advertising.
ROAS uses revenue, not profit. A ROAS of 3 can be very profitable for a product with high margins and a loss for one with thin margins. The ROAS where you break even is 1 divided by your profit margin: with a 25% margin, you need a ROAS of 4 just to cover the ads.
Reported ROAS depends on attribution: which sales the platform credits to the ad and over what window. Platforms tend to count generously, so many businesses also track blended ROAS (total revenue divided by total ad spend) to sanity-check.
Why ROAS matter
ROAS tells you whether advertising pays for itself and which campaigns deserve more budget. It is the simplest way to compare channels that bill in different ways.
Knowing your break-even ROAS stops you scaling campaigns that look busy but lose money on every order.
How to calculate ROAS
- Add up the revenue attributed to the campaign over a period.
- Divide it by the ad spend for the same period.
- Work out break-even ROAS as 1 / profit margin (as a decimal).
- Compare: above break-even is profitable on the first order; below it needs repeat purchases to pay off.
- Check platform ROAS against blended ROAS from your own sales data.
ROAS example
ROAS = revenue from ads / ad spend
$3,600 revenue / $900 spend = 4.0 ROAS
Break-even ROAS at a 30% margin = 1 / 0.30 = 3.33ROAS FAQ
What is a good ROAS?
A ROAS above your break-even point, which depends on your margin. Many ecommerce businesses aim for 3 to 4 or more, but a high-margin product can be profitable at a lower ROAS.
What is the difference between ROAS and ROI?
ROAS compares revenue to ad spend only. ROI compares profit to the total investment, including product costs, fees and other expenses, so it shows true profitability.
Related terms
CPA, or cost per acquisition, is what you pay in ads for each conversion, such as a sale, sign-up or lead. It equals spend divided by conversions.
CPC, or cost per click, is what you pay on average each time someone clicks your ad. It equals ad spend divided by the number of clicks.
CPM, or cost per mille, is what an advertiser pays for 1,000 ad impressions. It is the standard way to compare the price of reach across platforms.
Conversion rate is the percentage of people who take a desired action, like buying or signing up, out of everyone who could have.
Paid social is advertising on social platforms like Instagram, TikTok, Facebook and LinkedIn, where you pay to show posts to a chosen audience.
Retargeting shows ads to people who already interacted with your business, such as site visitors or video viewers, to bring them back to buy.