What Is ROAS?

ROAS — return on ad spend — is revenue divided by advertising cost, usually written as a ratio like 4:1 or as 400%. It answers one question: for every unit of currency put into ads, how much came back?

ROAS is the standard efficiency metric for paid media because it is simple and comparable: €10,000 revenue on €2,500 spend is a 4:1 ROAS, and you can compute it per campaign, per ad group, per creative, or per channel. That granularity is the point — a blended account-level figure hides the campaigns quietly funding the good ones.

It measures revenue, not profit, and that distinction is where most bad decisions start. A 4:1 ROAS on a product with a 20% margin loses money; the same ratio on software with 85% margins is excellent. The break-even point is the inverse of your contribution margin, so calculate that number once and treat it as the floor every campaign is judged against.

The attribution model behind the revenue figure changes the answer as much as performance does. Last-click credits the final touch and flatters bottom-funnel branded campaigns while making prospecting look worthless; a data-driven or multi-touch model spreads credit and tells a different story. Two dashboards reporting different ROAS for the same period are usually reporting different models, not different truth.

The practical play is to set a target ROAS from margin rather than from ambition, judge campaigns against it individually, and pair it with a lifetime-value view for anything with repeat purchase or subscription. A 2:1 first-purchase ROAS on customers who buy four more times is a better business than a 6:1 on one-off buyers who never return — and optimising purely for the higher ratio will shrink the account.

Examples

• €12,000 revenue from €3,000 spend = 4:1 ROAS (400%).
• A 3:1 ROAS on a 25% margin product: revenue looks healthy, the campaign is losing money on every sale.
• Branded search reporting 15:1 under last-click, mostly harvesting demand that prospecting campaigns created and got no credit for.