Return on Ad Spend (ROAS)

Return on Ad Spend (ROAS) measures how much revenue you earn for every currency unit spent on advertising. It’s typically expressed as a ratio:
ROAS = Advertising-attributed revenue ÷ Ad spend (e.g., ₹5 revenue for ₹1 spend = 5:1 ROAS). Platforms and finance sites define ROAS as “revenue generated per dollar of marketing spend.”

Ad platforms also use ROAS to optimize bids. For example, Google Ads Target ROAS and Meta ROAS goals aim campaigns at a desired revenue-per-spend outcome. 

Why It Matters

  • Clarity on media efficiency: Quickly shows which channels/campaigns return the most revenue per unit of spend. 

  • Actionable bidding: Smart bidding strategies (e.g., Target ROAS) use conversion value to scale what works. 

  • Budget allocation: Compare ROAS across campaigns to shift spend to top performers while watching profit.

  • Shared language: A simple ratio decision-makers and media buyers can use together.

Examples

  • Search campaign: ₹2,00,000 in sales from ₹50,000 spend → ROAS = 4.0 (4:1

  • Shopping ads: Marketplaces and retailers often track product-level ROAS from click-to-order revenue. (Amazon Ads explains ROAS and its calculation.) 

  • App & mobile: UA teams watch purchase ROAS (e.g., 7-day) using pixel/CAPI data in Meta or MMP dashboards. 

Best Practices

  1. Match ROAS to margins. A “good” ROAS depends on your gross margin and costs. If your blended margin is 40%, a 2.5:1 channel ROAS might be break-even after ad spend; set targets accordingly.

  2. Use the right lens:

    • Channel/platform ROAS (reported by Google/Meta) = revenue the platform attributes.

    • Blended ROAS / MER = total revenue ÷ total ad spend across channels; sanity-checks platform numbers. 

  3. Choose sensible windows. Align ROAS windows (e.g., 7-day click) to your buying cycle; compare apples to apples across platforms.

  4. Value the right events. Pass conversion value (net of discounts, excluding returns if possible) so bid algorithms optimize toward business value. (Google’s value-based bidding and Meta ROAS goals rely on this.) 

  5. Pair ROAS with profit metrics. ROAS is revenue-focused; track ROI, contribution margin, and LTV:CAC to ensure profit, not just revenue. 

  6. Test incrementality. Use holdouts/geo tests to see what portion of ROAS is truly causal vs. captured by attribution.

  7. Iterate to improve: Tighten targeting/keywords, improve ad relevance & landing pages, and speed up site performance to raise conversion value per click.

Related Terms

  • ROI (Return on Investment) 

  • Target ROAS (tROAS) 

  • ROAS Goal (Meta) 

  • MER / Blended ROAS 

FAQs

Q1. ROAS vs. ROI; what’s the difference?
ROAS looks at revenue per ad dollar. ROI accounts for profit after all costs (ad + product + ops, etc.). Use both: ROAS for media efficiency, ROI for business returns. 

Q2. What’s a “good” ROAS?
It depends on your unit economics (margins, repeat rate, AOV). For high-margin digital products, a lower ROAS can still be profitable; for low-margin retail, you’ll need a higher ROAS to break even.

Q3. Should I optimize to platform ROAS or blended ROAS?
Use platform ROAS for in-platform bidding decisions, and monitor blended ROAS / MER to ensure the total business is healthy. 

Q4. How do Google and Meta use ROAS?
Google’s Target ROAS optimizes bids toward a conversion value goal; Meta lets you set a ROAS goal so its delivery system aims to keep purchase ROAS near the target. 

Q5. How do I improve ROAS?
Tighten targeting/keywords, expand negatives, lift ad relevance, fix landing page experience, and pass accurate conversion values. (Quality/relevance and value-based bidding are key.)



‹ Revenue Attribution

Rage Clicks ›