ROAs

ROAS, or return on advertising spend, is a metric used to evaluate the efficiency of advertising campaigns by measuring the revenue generated for each unit of currency spent on ads. It is typically expressed as a ratio or multiple, calculated as ROAS = revenue attributed to ads divided by advertising spend. For example, an ad campaign that spends $500 and drives $2,000 in revenue has a ROAS of 4x (or 4:1).

ROAS differs from ROI in that it focuses on revenue relative to ad costs and does not automatically account for other expenses or profits. Variants include gross ROAS, which uses total ad-attributed revenue, and net ROAS, which may adjust for deductions such as refunds, discounts, or non-ad costs. ROAS is also sensitive to attribution models and windows, which determine how much revenue is credited to the ads.

In practice, ROAS informs budgeting, bid optimization, and channel comparisons. Marketers may compare ROAS across campaigns, products, or audiences to identify where ad dollars perform best. A simple benchmark is break-even ROAS, calculated as 1 divided by gross margin. For example, with a 50% gross margin, the break-even ROAS is 2x; campaigns must exceed this to be profitable when considering only gross margin.

Limitations include that ROAS does not account for overall profitability, lifetime value, or other operating costs. It can be distorted by attribution choices, seasonality, or inventory effects. Consequently, ROAS is most informative when viewed alongside margin, net profitability, and broader business goals.