ROAS
Return on ad spend. Revenue attributed to advertising divided by its cost.
What is ROAS?
ROAS, or return on ad spend, is a performance metric that compares the revenue credited to advertising with the money spent on that advertising. It is usually expressed as a ratio or multiple, so a figure above one means attributed revenue exceeded media cost. ROAS is widely used in ecommerce, retail media and app marketing to compare campaigns, channels and audiences and to set bidding targets in automated platforms. It differs from return on investment, which also accounts for product costs, fees and other expenses, and from CPA, which measures cost per action rather than revenue.
How ROAS works
Attributed revenue is divided by media spend for the same period and campaign.
- Define the campaign, time period and the revenue events to count, such as purchases or subscriptions.
- Choose an attribution method and window to decide which revenue is credited to the ads.
- Divide attributed revenue by ad spend for the same scope.
- Use the result to compare campaigns or set target ROAS bidding in buying platforms.
Why it matters
It measures efficiency for sales-driven campaigns. It depends on the attribution method, so figures from different platforms are not always comparable.
For advertisers
ROAS shows which campaigns pay back and helps decide where to shift budget.
For agencies
A shared ROAS definition with clients avoids disputes caused by different attribution windows or revenue measures.
Practical example
A campaign spends 2,000 and is credited with 8,000 in sales, a ROAS of 4.
Key considerations
- ROAS does not account for margins, so a campaign can show a strong ROAS and still be unprofitable.
- Attributed revenue may include sales that would have happened anyway; incrementality testing helps reveal true impact.
- Optimising only for ROAS can favour existing customers and lower-funnel tactics at the expense of reaching new buyers.
More Measurement & Optimization terms
Frequently asked questions
How is ROAS different from ROI?
ROAS compares revenue with ad spend only, while ROI compares profit with total investment, including product and operating costs.
What counts as a good ROAS?
It depends on margins, business model and goals; the break-even point is the ROAS at which gross profit covers ad spend.
What is target ROAS bidding?
A bidding strategy in which a platform adjusts bids automatically to achieve an average ROAS set by the advertiser.