What Is ROAS? Definition
ROAS (return on ad spend) is the revenue attributed to advertising divided by the amount spent on that advertising. A ROAS of 4 means $4 of attributed revenue for every $1 of ad spend.
How to calculate it
Divide attributed revenue by ad spend. If a campaign spends $50,000 and is credited with $200,000 in sales, ROAS is 4.
Break-even ROAS
Break-even ROAS is one divided by gross margin. A brand with a 40% gross margin breaks even at a ROAS of 2.5, because each ad dollar must return enough revenue to cover the cost of the product sold. Any return above that is profit on the first purchase.
What it leaves out
ROAS does not show profit by itself, and platform-reported ROAS can credit sales that would have happened anyway. Pair it with incrementality tests and judge it against break-even. See the paid media budget guide for how to set a budget from a target ROAS.
Related terms: paid media, incrementality, media planning.
Related terms