What is ROAS? — ROAS meaning
Return on ad spend or ROAS is the amount of revenue a company generates for every dollar (or any currency unit) spent on an advertising source.
When a business tests a new advertising source for a campaign, it may compare the ROAS at different stages of the campaign with other advertising sources to gauge their performance and determine which should get renewed.
Do you ever wonder why some companies ask you where you learned about them, particularly when you're filling in a form? They're trying to gather information to know whether their advertising is yielding profit. That's ROAS in action.
How to calculate ROAS — ROAS calculation formula
The ROAS formula is:
ROAS = (Revenue from advertising / Cost of advertising) × 100%
That means if you spent $1,000 on Facebook ads in one month and your revenue for that month is $3,000, your ROAS is ($3,000 / $1,000) × 100 = 300%.
If you made only $900 in revenue for the same $1,000 spend, your ROAS is ($900 / $1,000) × 100 = 90%. Anything less than 100% is a loss — you earned less than you spent on advertising.
ROAS is NOT ROI!
While ROI (Return on Investment) gives a more accurate evaluation of your entire business performance, ROAS is restricted to the performance of your ad spend. To calculate ROI, you also need your profit margin — use the profit margin field in the calculator above to get a combined view.
What is a good ROAS?
A 300% ROAS means that you gained $2 from every $1 spent on advertising. But if you have to pay for other expenses such as employee costs, delivery fees, and transaction fees from that $2, your margin reduces further.
According to industry benchmarks, most e-commerce businesses are within profit territory when ROAS is 800% and above. Here's a quick reference:
- ≥ 800% — Excellent. Strong profit territory.
- 400–799% — Good. Likely profitable after operational costs.
- 100–399% — Needs review. Reevaluate your targeting and creative strategy.
- < 100% — Loss. Revenue is less than ad spend.
A ROAS less than 400% means you need to reevaluate your advertising strategy. Review your audience targeting and optimize your campaign to get the best result from your marketing budget.
How to use the ROAS calculator
- Select your currency — choose from 20 world currencies (USD, RUB, EUR, GBP, and more).
- Enter Ad Spend — the total cost of your advertising campaign.
- Choose revenue mode:
- I know my revenue — enter the revenue generated from the campaign to get your actual ROAS.
- I don't know my revenue — enter a target ROAS% to find out how much revenue you need. Enter 100% to find the break-even revenue.
- Optional: Profit Margin — enter your gross profit margin percentage to also calculate ROI (how much net profit you actually make after costs).
Factors that influence your ROAS metric
- Brand popularity. If you are new in a market, you're likely to have a low ROAS compared to when you've established your brand.
- Ad type. Banner ads may have a lower ROAS since they're less likely to be clicked, but they effectively improve brand awareness.
- Failing campaigns. If your ROAS is below 300% after establishing a foothold, review your audience targeting and optimize.
- Customer reviews. Trust signals dramatically affect conversion rates and, therefore, ROAS.
- Product description and images. High-quality listings convert better.
- Product price. Pricing affects both click-through and conversion rates.
FAQs
What does ROAS mean?
ROAS means Return on Ad Spend. It is a metric that evaluates the performance of the cost of advertising by measuring how much revenue is generated for each currency unit spent on ads.
What is the difference between ROAS and ROI?
ROAS measures revenue generated relative to ad spend only. ROI (Return on Investment) accounts for all costs including production, overhead, and operational expenses, giving a fuller picture of profitability. Use the profit margin field in our calculator to bridge the gap between ROAS and ROI.
What is break-even ROAS?
Break-even ROAS is 100% — the point where your ad revenue exactly equals your ad spend. Below 100% you are losing money on advertising. Use the "I don't know my revenue" mode and enter 100% as your ROAS target to find the minimum revenue you need to break even.
Is ROAS measured in percent?
ROAS is typically expressed as a percentage (e.g., 300%) or as a ratio (e.g., 3:1 or 3×), meaning you earn $3 for every $1 spent. Our calculator displays it as a percentage for clarity.