Return on ad spend (ROAS)
Also known as: ROAS, return on advertising spend, revenue per ad dollar
Return on ad spend (ROAS) is the revenue attributed to advertising divided by the cost of that advertising, usually shown as a ratio or a percentage.
ROAS = revenue attributed to ads / ad spend × 100%ROAS answers how much revenue each dollar of ad spend brought back. It uses revenue, not profit, and only media cost, not the whole marketing budget. That is the difference from ROMI, which subtracts costs and counts margin. A campaign can show a ROAS of 300% and still lose money.
Example
A B2B online store for lab supplies runs shopping ads for one month with a budget of $20,000. The ad platform attributes orders worth $80,000. Gross margin on the product mix is 30%.
ROAS: $80,000 / $20,000 × 100% = 400%. Gross profit from those orders: $80,000 × 30% = $24,000. Profit after ad spend: $24,000 − $20,000 = $4,000.
Break-even ROAS is 1 / gross margin, here 1 / 0.30 ≈ 333%. Below that line every order loses money before overhead is counted. The figures are illustrative.
How to use it
Calculate break-even ROAS for each product line first, then set targets above it. Use ROAS to compare campaigns with short purchase cycles, such as ecommerce and transactional fintech products. For B2B with long sales cycles and repeat contracts, first-order ROAS understates value; read it next to customer lifetime value or switch to CAC and payback.
Decide which attribution model feeds the revenue number and keep it fixed. The same campaign can show very different ROAS under last-click and data-driven attribution.
Common mistakes
- Treating ROAS as profit and scaling a campaign that sits below break-even.
- Adding the ROAS reported by each platform. Several platforms claim the same order, and the sum exceeds actual revenue.
- Counting revenue before returns, cancellations and refunds.
- Comparing ROAS across products with different margins as if 400% meant the same thing everywhere.