← Glossary Marketing

ROAS (Return on Ad Spend)

Revenue generated per dollar of ad spend. The classic ad-accountability metric.

Explained simply.

ROAS = revenue attributed to ads ÷ ad spend. If you spent $10k on Meta ads and attributed $30k of revenue to them, ROAS = 3. Paid-advertising teams live by this number. But revenue isn't profit, so ROAS can mislead. A 3x ROAS on a 20%-margin product means you're losing money.

An example.

Spend $5k on Google ads. 500 clicks. 20 sales at $100 each = $2,000 revenue. ROAS = 0.4, losing money. Spend $5k on a different campaign, same 20 sales at $500 each = $10,000 revenue. ROAS = 2. The second is better, same customers, better price.

Why it matters.

ROAS is the standard unit for talking about ad performance. Know your target ROAS (usually 3-5x for mid-margin businesses) and optimize campaigns against it. But ALWAYS cross-check against CAC, LTV, and margin, ROAS alone can make a losing business look great.