E-commerce

ROAS — Return on Ad Spend

The revenue generated for every dollar spent on advertising.

Definition

Return on Ad Spend (ROAS) measures the revenue efficiency of your advertising campaigns. It tells you how many dollars of revenue you earn for every dollar you invest in ads. ROAS is the most direct measure of a campaign's financial performance and is widely used in e-commerce, DTC brands, and any business where purchases are tracked online. A ROAS of 4.0 (or 400%) means you're generating $4 in revenue for every $1 spent. ROAS differs from ROI in that it focuses purely on ad spend vs. revenue, without accounting for other costs like COGS or overhead.

Formula

ROAS = Revenue from Ads ÷ Ad Spend

Divide the total revenue attributed to your ad campaign by the total amount spent on those ads.

Example

You spend $5,000 on Google Shopping ads and attribute $25,000 in sales to those campaigns. ROAS = $25,000 ÷ $5,000 = 5.0 (or 500%). For every $1 you spent, you earned $5 back.

Key Points

ROAS above 1.0 means campaigns are generating more revenue than they cost
Break-even ROAS depends on your gross margin — a 30% margin product requires at least 3.3× ROAS to break even
ROAS is not the same as profit — you must also account for COGS and overhead
Target ROAS (tROAS) bidding in Google Ads automates bids to hit a desired ROAS
Benchmark ROAS varies by industry; e-commerce averages around 4×