Return on Ad Spend(ROAS)
Revenue generated per dollar of advertising spend.
Return on Ad Spend measures the revenue generated for each dollar spent on advertising. It's the standard performance metric for paid media at the campaign level. ROAS of 4 means $4 of revenue per $1 of ad spend.
A common mistake is targeting ROAS without considering margin. A 4:1 ROAS on a 25% gross margin product means you're breaking even after cost of goods. The right ROAS target depends on your unit economics, not industry benchmarks.
ROAS is also distorted by attribution windows and channel choice. A campaign optimized for last-click ROAS often steals credit from earlier funnel campaigns that did the actual customer acquisition work.
ROAS = Revenue from Ads / Ad SpendSpend $10,000 on Google Ads, generate $40,000 in revenue. ROAS = $40,000 / $10,000 = 4 (or 400%).
Frequently asked questions
What's a good ROAS?
Depends on your gross margin. For DTC e-commerce with 60% margin, ROAS 2.5+ is typically profitable. For lead-gen with 10% margin on revenue, you need ROAS 12+ just to break even on customer acquisition.
ROAS or ROI?
ROAS measures revenue per ad dollar; ROI measures profit per dollar invested. ROI is more decision-useful but harder to calculate. Most paid teams use ROAS day-to-day and check ROI quarterly.
Related terms
Total cost to acquire one new paying customer.
The price you pay each time someone clicks your ad.
The cost per 1,000 ad impressions.
The process of assigning credit for conversions to the marketing touchpoints that contributed.
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