What is ROAS in advertising?

What is ROAS?

ROAS stands for Return on Ad Spend, and it’s a way to measure how much money you’re earning for every dollar you spend on advertising.

Think of it like this: If you spend $1 on an ad and earn $4 in sales because of that ad, your ROAS is 4:1 (or just “4”). It means for every $1 spent, you’re getting $4 back.

How Do You Calculate ROAS?

The formula is simple:

ROAS = Revenue from Ads ÷ Cost of Ads

For example:

  • If you spend $100 on ads and those ads generate $500 in sales:
  • ROAS = 500 ÷ 100 = 5 (or 5:1)

Why is ROAS Important?

ROAS helps you:

  1. Understand Profitability: Are your ads making more money than they cost?
  2. Compare Campaigns: Which ad campaigns are performing better?
  3. Make Smarter Decisions: Focus your money on the ads that are driving the best results.

What’s a Good ROAS?

It depends on your business. For most businesses:

  • A ROAS of 1 means you’re breaking even (spending $1 and earning $1 back).
  • A ROAS above 1 means you’re making a profit.
  • A ROAS below 1 means you’re losing money.


For example, if you sell high-margin products, like software, you might aim for a higher ROAS (e.g., 5 or more). If you sell lower-margin products, like groceries, a ROAS of 2 might still be great.

Bottom Line

ROAS is like a report card for your ads—it shows how much bang you’re getting for your buck. The higher the ROAS, the better your ads are performing.