What is ROAS (return on ad spend)?
Quick answer
ROAS, or return on ad spend, is the revenue an advertising campaign brought in divided by what it cost. A campaign that spent $2,000 and drove $9,000 in sales has a ROAS of 4.5, often written 4.5x or 450%.
Last updated
Updated · By Robert Breen
Why it matters
ROAS is the quickest way to compare campaigns and channels that sell products online. It answers "for every dollar we put in, how many come back as sales?" in a single number.
But ROAS uses revenue, not profit, so a "good" ROAS depends on your margin. A store with a 70% margin can profit at 2x, while a store with a 20% margin loses money below 5x. Knowing your break-even ROAS is what makes the number useful.
A worked example
A home-goods store runs three campaigns in October. Google Shopping spends $3,000 for $15,600 in sales (5.2x). Meta prospecting spends $2,500 for $5,500 (2.2x). Retargeting spends $800 for $7,200 (9x).
The store’s gross margin is 45%, so break-even ROAS is 1 / 0.45, about 2.2x. Meta prospecting is only breaking even, and retargeting looks best. But retargeting mostly reaches people who were already likely to buy, so the team keeps prospecting running to feed it and tests new creative to lift its ROAS, rather than cutting it.
Often confused with
ROAS vs ROI
ROI uses profit and all costs: (profit − cost) / cost. ROAS uses revenue and ad spend only. A campaign can have a 3x ROAS and a negative ROI once product costs are counted.
ROAS vs CPA
CPA is the cost of one conversion. ROAS is revenue per dollar spent. Stores with one price often use CPA; stores with varied basket sizes prefer ROAS.
Platform ROAS vs real ROAS
Each ad platform counts the sales it believes it caused, and two platforms can claim the same order. Compare the total against your store’s actual revenue.
Tips
- Calculate break-even ROAS: 1 divided by your gross margin.
- Judge retargeting and prospecting separately; they do different jobs.
- Look at a 30-day window or longer for products people think about before buying.
Related terms
Learn it in a free lesson
- PPC Metrics Explained: CPC, CTR, CPA and ROAS With Examples (about 11 minutes)
Questions about it
- How do you calculate ROAS, and what is a good ROAS?: ROAS is ad revenue divided by ad spend. A good ROAS is any figure above your break-even ROAS, which is 1 divided by your gross margin…
Related in the AI glossary
Frequently asked questions
- How do you calculate ROAS?
- Revenue from ads divided by ad spend. $12,000 / $3,000 = 4x ROAS.
- What is a good ROAS?
- Anything above your break-even ROAS, which is 1 divided by your gross margin. Many ecommerce businesses aim for 3x to 5x.
- Is ROAS a percentage or a ratio?
- Either. A ROAS of 4 can be written 4x, 4:1 or 400%. They all mean $4 of revenue per $1 of spend.
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