Return on Ad Spend (ROAS)
Return on ad spend is the revenue you earn for every dollar spent on advertising.
Return on ad spend (ROAS) is the revenue generated divided by the amount spent on advertising, usually expressed as a ratio. The formula is ad revenue / ad cost. A ROAS of 4 means you earned four dollars for every dollar spent. It is the bottom-line profitability metric for paid social and search, answering whether campaigns make money rather than just clicks. Unlike CTR or CPC, ROAS connects ad spend to actual sales, so it depends on accurate conversion tracking. The break-even ROAS varies by margin: a business with thin margins needs a higher ratio to profit. Marketers use ROAS to scale winning campaigns, cut losers, and allocate budget across channels.
Examples
- Spending 1,000 dollars to drive 5,000 dollars in sales gives a 5x ROAS.
- A campaign at 2x ROAS is unprofitable for a brand with 60 percent costs.
- Shifting budget to a 6x ROAS audience beats one at 3x.