ROAS
Also called: Return on ad spend
ROAS is revenue generated by ads divided by what was spent on them. A ROAS of 4 means $4 in sales for every $1 of media.
ROAS (return on ad spend) measures how much revenue each dollar spent on ads brought in. It is the main KPI for e-commerce campaigns and for businesses where the sale happens online and each order’s value is known.
How it works
The formula is revenue attributed to ads ÷ ad cost. To judge whether a ROAS is good, compare it with margin: if gross margin is 25%, the break-even ROAS on media is 4. In B2B sales, where deals close offline and take weeks, teams usually track CPA (cost per acquisition of a qualified lead or quote) first and import closed deals from the CRM to calculate real ROAS later.
Practical example
A parts store spent $6,000 in a month and ads generated $27,000 in orders: ROAS 4.5. With a 30% margin, break-even was ROAS 3.3, so the campaign was profitable. After removing low-margin products from the advertised catalog, ROAS rose to 5.2.
Common mistakes
- Celebrating a high ROAS without looking at the margin of what was sold.
- Counting the same sale across several channels and overstating the return.
- Using ROAS for long B2B sales without importing closed deals from the CRM.
FAQ
Are ROAS and ROI the same?
No. ROAS only considers media cost; ROI considers all costs (product, shipping, staff, agency) and shows real profit.
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