ROAS (Return on ad spend): what it means in advertising

Definition

ROAS (return on ad spend) is the revenue generated by advertising divided by the amount spent on it. A campaign that spends $2,000 and produces $8,000 has a ROAS of 4.0, written as 4x or 400%. ROAS measures revenue, not profit, so it cannot tell you whether a campaign made money without knowing your margin.

How it is calculated

ROAS = Revenue ÷ Ad spend

What to know

The number is only meaningful next to your break-even ROAS, which is 1 divided by your gross margin. At a 40% margin you need 2.5x just to cover costs, so a 2x ROAS that looks acceptable in a dashboard is losing money on every order.

Platform-reported ROAS is also self-assessed. Meta counts conversions it believes it caused within its own attribution window, and Google does the same, so running both and adding the numbers up will double-count revenue.

Related terms

Break-even ROASBreak-even ROAS is the return on ad spend at which a campaign covers its costs exactly, calculated as 1 divide...Blended ROASBlended ROAS is total revenue from all sources divided by total advertising spend across all platforms. It is ...CPACPA (cost per acquisition) is ad spend divided by the number of conversions. Spending $2,000 to generate 50 co...AOVAOV (average order value) is total revenue divided by number of orders. $48,000 across 600 orders is an AOV of...

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