ROAS (Return on Ad Spend) is the north star metric for performance marketers. It tells you exactly how much revenue you're generating for every dollar invested in advertising—and whether your campaigns are actually profitable.
But while the formula is simple, understanding what makes a "good" ROAS and how to improve it requires a deeper look at your business model, margins, and campaign strategy.
This guide covers everything you need to know about ROAS: the formula, industry benchmarks, how it differs from ROI, and actionable strategies to improve your return on ad spend across Google, Meta, and other platforms.
What is ROAS?
ROAS stands for Return on Ad Spend. It measures the revenue generated for every dollar spent on advertising. Unlike broader business metrics, ROAS focuses specifically on advertising efficiency.
The ROAS Formula
ROAS = Revenue from Ads ÷ Ad Spend
Example: $10,000 revenue ÷ $2,500 ad spend = 4:1 ROAS
ROAS can be expressed in three ways:
4:1
As a ratio
"4 to 1"
400%
As a percentage
"400% return"
4x
As a multiplier
"4x ROAS"
Key insight: A ROAS of 4:1 means for every $1 you spend on advertising, you generate $4 in revenue. But remember—this is revenue, not profit. You still need to account for product costs, fulfillment, and other expenses.
ROAS vs. ROI: What's the Difference?
ROAS and ROI are often confused, but they measure different things:
| Metric | Formula | What It Measures |
|---|---|---|
| ROAS | Revenue ÷ Ad Spend | Revenue generated per ad dollar |
| ROI | (Revenue - Total Costs) ÷ Total Costs × 100 | Actual profit after all costs |
Example: ROAS vs. ROI in Practice
Let's say you spend $1,000 on ads and generate $4,000 in revenue:
- ROAS: $4,000 ÷ $1,000 = 4:1 (looks great!)
- Product cost (50% margin): $2,000
- Profit: $4,000 - $2,000 - $1,000 = $1,000
- ROI: ($1,000 profit ÷ $1,000 ad spend) × 100 = 100%
A 4:1 ROAS translates to 100% ROI after accounting for 50% product margins.
The takeaway: ROAS is a useful marketing metric, but always calculate your actual ROI to understand true profitability.
What is a Good ROAS?
There's no universal "good" ROAS—it depends entirely on your business model and profit margins. Here's how to think about it:
ROAS Benchmarks by Industry
| Industry | Average ROAS | Good ROAS |
|---|---|---|
| E-commerce (general) | 4:1 | 5:1 - 8:1 |
| Fashion & Apparel | 3:1 - 4:1 | 5:1+ |
| SaaS / Subscriptions | 2:1 - 3:1 | 3:1+ (with LTV) |
| Lead Generation | Varies | Depends on close rate |
| High-margin products | 2:1 - 3:1 | 3:1+ is often profitable |
How to Calculate Your Breakeven ROAS
Your breakeven ROAS tells you the minimum ROAS needed to cover costs (not make a profit, just break even):
Breakeven ROAS Formula
Breakeven ROAS = 1 ÷ Profit Margin
25% margin
1 ÷ 0.25 = 4:1
50% margin
1 ÷ 0.50 = 2:1
75% margin
1 ÷ 0.75 = 1.33:1
Remember: Breakeven is just to cover costs. To actually make profit, you need to exceed your breakeven ROAS. A general rule: aim for at least 20-30% above breakeven for healthy profitability.
How to Improve Your ROAS
Improving ROAS comes down to two things: increasing revenue from ads or decreasing ad spend while maintaining revenue. Here are proven strategies:
1. Optimize Targeting
Better targeting means reaching people more likely to convert, which increases revenue without increasing spend:
- Build lookalike audiences from your best customers (not just all customers)
- Use value-based lookalikes weighted by purchase amount
- Layer in demographic and interest targeting for more precision
- Exclude recent purchasers from prospecting campaigns
2. Improve Ad Creative
Better creative improves CTR and conversion rates, driving more revenue from the same spend:
- Test multiple hooks in the first 3 seconds of video ads
- Use UGC-style content for authenticity
- Highlight social proof, reviews, and testimonials
- A/B test headlines, images, and CTAs systematically
3. Increase Average Order Value (AOV)
Higher AOV means more revenue per conversion, directly improving ROAS:
- Bundle products together with attractive pricing
- Add upsells and cross-sells in the checkout flow
- Offer free shipping thresholds above average order size
- Create premium product tiers or packages
4. Optimize Landing Pages
Higher conversion rates mean more revenue from the same traffic:
- Match landing page messaging to ad creative
- Reduce page load time (aim for under 3 seconds)
- Simplify checkout with fewer steps and fields
- Add trust signals: reviews, guarantees, secure checkout badges
5. Reduce Wasted Spend
Cutting waste directly improves ROAS by reducing the denominator:
- Regularly audit and pause underperforming ads
- Add negative keywords to Google Ads campaigns
- Review placement reports and exclude low-quality sites
- Set frequency caps to avoid ad fatigue
ROAS by Advertising Platform
Each platform measures and optimizes ROAS differently. Here's what you need to know:
Google Ads ROAS
Google calls it "Conv. value / cost" and offers tROAS (Target ROAS) bidding:
- Search campaigns: Typically higher ROAS (4-8x) for branded and high-intent keywords
- Shopping campaigns: Usually 3-5x ROAS for competitive e-commerce
- Performance Max: Mixed results, often 3-6x ROAS depending on creative
Meta (Facebook/Instagram) ROAS
Meta shows "Purchase ROAS" in Ads Manager. Key considerations:
- Attribution window: Default is 7-day click, 1-day view—can inflate ROAS
- iOS 14+ impact: Some conversions are modeled, not measured directly
- Typical range: 2-5x ROAS for cold prospecting, 5-10x+ for retargeting
Cross-Platform ROAS Tracking
Each platform takes credit for the same conversion differently. To get accurate ROAS:
- Use a unified dashboard that pulls data from all platforms
- Cross-reference with your actual revenue (Shopify, Stripe, etc.)
- Use consistent attribution windows across platforms for comparison
- Calculate blended ROAS (total revenue ÷ total ad spend across all platforms)
Tools like marketingOS can help unify ROAS tracking across all your ad platforms in one dashboard.
Common ROAS Mistakes to Avoid
1. Ignoring Attribution Windows
Different platforms use different attribution windows. Meta's 7-day click includes conversions that may have happened anyway, while Google's last-click may undercount brand searches that started on Meta.
2. Optimizing for Platform ROAS, Not True ROAS
Platforms count conversions differently. High platform ROAS doesn't always mean high actual revenue. Always verify with your own sales data.
3. Not Accounting for Returns
ROAS is calculated on orders, but returns reduce actual revenue. High ROAS with high return rates can actually be unprofitable.
4. Ignoring Customer Lifetime Value
A 2:1 ROAS might look bad, but if those customers have a high repeat purchase rate, the actual LTV-adjusted ROAS could be much higher.
5. Chasing ROAS at All Costs
Maximizing ROAS often means limiting scale. You might achieve 8:1 ROAS on $1,000/month, but scaling to $10,000/month at 4:1 ROAS generates more profit.
Frequently Asked Questions
What is ROAS in marketing?
ROAS (Return on Ad Spend) is a marketing metric that measures the revenue earned for every dollar spent on advertising. It's calculated by dividing revenue generated from ads by the cost of those ads. A ROAS of 4:1 means you earned $4 for every $1 spent on advertising.
What is the ROAS formula?
The ROAS formula is: ROAS = Revenue from Ads ÷ Ad Spend. For example, if you spent $1,000 on ads and generated $5,000 in revenue, your ROAS would be 5:1 or 500%. You can express ROAS as a ratio (5:1), percentage (500%), or multiplier (5x).
What is a good ROAS?
A "good" ROAS varies by industry and business model. For e-commerce, a ROAS of 4:1 to 6:1 is generally considered good. High-margin businesses can be profitable with 2:1 ROAS, while low-margin businesses may need 8:1 or higher. The key is to calculate your breakeven ROAS based on your profit margins.
What's the difference between ROAS and ROI?
ROAS measures revenue against ad spend only, while ROI (Return on Investment) accounts for all costs including product costs, overhead, and labor. ROAS of 4:1 might look great, but after accounting for product costs (50% margin), your actual ROI is 100%. ROAS is a marketing metric; ROI is a business metric.
How do I improve my ROAS?
To improve ROAS: (1) Optimize targeting to reach higher-intent audiences, (2) Improve ad creative for higher CTR and conversion rates, (3) Increase average order value through upsells and bundles, (4) Optimize landing pages for conversions, (5) Use better attribution to understand true performance, (6) Reduce wasted spend by pausing underperforming ads.
Final Thoughts
ROAS is one of the most important metrics in performance marketing—but it's not the only one. A great ROAS means nothing if your total revenue is too small to matter, and a low ROAS can still be profitable with high lifetime value.
The key is understanding your breakeven ROAS based on your margins, tracking accurately across platforms, and continuously optimizing through better targeting, creative, and conversion rates.
Tools like marketingOS can help you track ROAS across all your advertising platforms in one unified dashboard, making it easier to see the full picture and make better decisions.