What ROAS is
Return on ad spend answers one question: how much revenue did each unit of advertising spend
produce?
ROAS = revenue from advertising / advertising cost
Example: 500,000 revenue / 100,000 spend = 5 (500%)
The result reads as a multiple (5x) or a percentage (500%): advertising returned five units of
revenue for each one spent.
ROAS and margin
ROAS counts revenue, not profit, so on its own it does not say whether you made money. The
break-even point depends on margin:
Break-even ROAS = 1 / margin
At a 25% margin → break-even ROAS = 4 (400%)
Anything above the threshold is profit. That is why ROAS is always read together with margin. For a
profit-based view, use return on investment instead.
ROAS, ROI and ROMI
| Metric | Basis | What it accounts for |
|---|---|---|
| ROAS | Revenue / advertising cost | Advertising only, on revenue |
| ROI | Profit / all costs | The whole economics, on profit |
| ROMI | Profit / marketing costs | Marketing, on profit |
Not to be confused: ROAS is not ROA
ROAS is a marketing metric of advertising payback. ROA, return on assets, is a financial
measure of how profitably a company uses its assets. Similar acronyms, different disciplines.
How to raise ROAS
- Grow the numerator through average order value and conversion, not only by cutting spend.
- Verify scenarios with an A/B test and scale only what pays back.
- Bring warm audiences back through retargeting, where payback is usually higher.
- Continue the advertising promise on the landing experience — most paid traffic still meets a
generic page, which is where the cheapest conversion gains sit.