What is ROAS (Return on Ad Spend)?

Return on Ad Spend (ROAS) measures how much revenue your advertising generates for every dollar spent. A ROAS of 4x means you earn $4 for every $1 in ad spend.

Why It Matters

ROAS is the primary efficiency metric for paid acquisition channels. It tells you whether your ad campaigns are generating profitable revenue or burning cash.

How to Calculate It

ROAS = Revenue from Ads ÷ Ad Spend

If you spent $10,000 on Meta Ads and generated $40,000 in revenue:

ROAS = $40,000 ÷ $10,000 = 4.0x

ROAS vs. ROI

ROAS only considers ad spend, not total costs. ROI (Return on Investment) accounts for all costs including COGS, shipping, and overhead. A 4x ROAS doesn’t mean 4x profit.

What’s a “Good” ROAS?

There’s no universal answer — it depends on your margins:

High-margin brands (70%+ GM): 2.5x+ can be profitable
Mid-margin brands (50-70% GM): 3x-4x is typically needed
Low-margin brands (<50% GM): 5x+ may be required

Beyond First-Purchase ROAS

Smart brands look at LTV-adjusted ROAS, which factors in repeat purchases. A campaign with 2x first-purchase ROAS might actually be 6x when you include the customer’s future orders.