Return on Ad Spend
Revenue generated for every currency unit spent on advertising.
Formula
Variables
Example
$5 000 revenue on $1 000 spend → ROAS = 5×
How it works
Return on Ad Spend (ROAS) compares the revenue directly linked to an advertising campaign with the amount of money paid for that advertising. It works as a ratio because it answers a simple efficiency question: for each unit of currency spent, how much revenue was brought in? A ROAS above 1 means the campaign generated more revenue than it cost, while a ROAS below 1 means the ad spend did not fully pay back in revenue.
When to use it
Use ROAS when evaluating paid advertising performance on channels like search ads, social media ads, or display campaigns. It is especially useful for deciding which campaigns, ad sets, or keywords are producing the strongest revenue return relative to their cost.
Worked example, step by step
A clothing store runs a social media ad campaign. Revenue attributed to the ads = $8,400 Ad spend = $2,800 ROAS = Revenue from Ads / Ad Spend ROAS = 8,400 / 2,800 ROAS = 3 So, the campaign returned $3 in revenue for every $1 spent on advertising.
Common mistakes to avoid
- Using total business revenue instead of revenue actually attributed to the ads
- Mixing up ROAS with profit, which also subtracts other costs like product and fulfilment expenses
- Forgetting that ROAS is a ratio and may be written as 3x, 300%, or 3:1 depending on the context
Did You Know?
A ROAS of 4× is a common benchmark — meaning $4 earned for every $1 spent.
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