Analytics & Metrics
Return on Ad Spend (ROAS)
Return on ad spend is a metric that measures how much revenue an ad campaign generates for every dollar spent on advertising. Expressed as a ratio, ROAS tells marketers whether paid campaigns are profitable and which channels, audiences, or creatives deliver the most revenue per dollar.
Why it matters
ROAS is the core efficiency metric for paid media, helping marketers decide where to scale budget and where to cut. It connects ad spend directly to revenue, making campaign value legible to finance and leadership.
How it is measured
ROAS = revenue from ads / ad spend. Example: $5,000 in revenue from $1,000 in ad spend gives a ROAS of 5, often written 5:1 or 500%. ROAS ignores product and operating costs, so a 'break-even' ROAS depends on your margins.
Typical benchmarks
A ROAS of around 4:1 is often cited as a common starting target for ecommerce, but the right number depends entirely on your profit margin. High-margin businesses can be profitable at lower ROAS than low-margin ones.
Frequently asked questions
What is a good ROAS?
A frequently cited reference is 4:1, but the only meaningful target is your break-even ROAS, set by your margins. A business with thin margins may need a much higher ROAS to profit than one with high margins.
How is ROAS different from ROI?
ROAS compares revenue to ad spend only. ROI compares profit to total investment, including product costs, labor, and tools. ROAS can look strong while ROI is negative once full costs are counted.
Is ROAS a ratio or a percentage?
Both forms are used. A ROAS of 5 can be written as 5:1 or 500%. The underlying calculation is identical: revenue divided by ad spend.