ROAS · Return On Ad Spend
ROAS measures the revenue generated for every dollar invested in advertising. A ROAS of 4 means $1 of budget brings in $4 of revenue.
The formula
ROAS = Revenue generated ÷ Ad spend
A concrete example
Example
You spend $2,000 on Google Ads and those campaigns generate $7,000 in sales: your ROAS is 7,000 ÷ 2,000 = 3.5x.
Why it matters
ROAS tells you whether your advertising is profitable, but it is revenue, not profit. A ROAS of 3 is excellent with a 60% margin and a loss with 20%. Your real threshold depends on your gross margin.
Frequently asked questions
- What is a good ROAS?
- It depends on your margin. In e-commerce, the target is often 3 to 4. For a high-margin business, a ROAS of 2 can be enough to be profitable. The right benchmark is your break-even point, not a universal value.
- ROAS or ROI, what is the difference?
- ROAS compares revenue to ad spend alone. ROI includes all costs and reasons in profit. ROAS is a media management metric, ROI an overall profitability metric.