Term · Marketing & analytics
ROAS (return on ad spend)
ROAS — return on ad spend — shows how much revenue advertising generates for each unit of currency spent on it.
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Explained
ROAS = revenue attributed to ads ÷ ad spend
A ROAS of 4 means four manats of revenue for each manat spent (often written as 400%).
Why ROAS alone can mislead
- Revenue is not profit. With low margins, a high ROAS can still lose money. Compare ROAS with the break-even point from your margins.
- Attribution decides the number. Which ad gets credit for a sale depends on the attribution model; different models give different ROAS.
- Missing revenue. Sales completed by phone, messenger or in store may not be attributed without offline data. See offline conversions.
- Refunds and cancellations reduce real revenue.
- Remarketing inflates ROAS by reaching people who would have bought anyway.
Break-even ROAS
If gross margin is 25%, each manat of revenue brings 0.25 manat of gross profit; ads break even at a ROAS of 4 before other costs. Your targets should come from your own margins.
ROAS and lifetime value
For businesses with repeat customers, first-purchase ROAS understates value. Considering LTV allows higher acquisition spend when customers return.
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FAQ
Frequently asked questions
What is a good ROAS?
The one that is profitable for your margins and growth goals. There is no universal figure.
Is ROAS the same as ROI?
No. ROI compares profit with total investment; ROAS compares revenue with ad spend only.