ROAS
Return on ad spend
ROAS (return on ad spend) is the ratio of revenue to the money invested in advertising. It tells you how much revenue each unit of money spent on a campaign brought back. It is a key metric used to decide whether advertising pays off and where to shift the budget.
How ROAS is calculated
You get ROAS by dividing revenue from advertising by the cost of that advertising. If a campaign brought back four times what you put into it, we talk about a ROAS of 4, or 400%. The result is usually expressed as a multiple or a percentage and is measured per campaign, channel, or the whole account.
For the number to be reliable, you need conversion tracking and conversion values set up correctly. Without that, the system doesn’t know how much revenue the ads actually generated and ROAS is only an estimate. That is exactly why accurate conversion tracking is the foundation of any meaningful PPC campaign.
What ROAS is good and why it depends on margin
There is no universally good number. Whether your ROAS is enough depends on your margin. A company with a low margin needs a higher ROAS for advertising to be profitable, while a high-margin business can be profitable at lower values.
Always judge ROAS in the context of costs and goals. A higher ROAS on a smaller budget may not be better than a slightly lower ROAS that brings you far more customers and more total profit.
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Explore our PPC servicesFrequently asked questions
What is the difference between ROAS and ROI?
ROAS compares revenue to advertising costs. ROI goes further and compares total profit to all costs, not just advertising ones. ROAS is therefore more narrowly focused on the performance of the campaign itself, while ROI assesses profitability as a whole.
What ROAS is good?
It depends on your margin and goals. A ROAS that is great for one company won’t be enough for another. The key is to know the point at which advertising still pays off for you and to keep ROAS above it.
Why is my ROAS high but the business isn’t making money?
A high ROAS is often achieved on a small budget or only on loyal customers. If you want to grow, it can sometimes be better to let ROAS drop, acquire more new customers, and earn more in absolute terms.