ROAS – Return on Ad Spend
Revenue generated divided by ad spend. A ROAS of 4 means $4 in revenue for every $1 spent on ads.
In practice
ROAS is a 'flashlight,' not 'the truth.' A ROAS of 6 sounds great — but if margin is 20%, you're still losing money. Break-even ROAS = 1 / margin.
Common misconception
Looking at ROAS by campaign alone. A ROAS of 8 can be stealing conversions from organic — true ROAS is much lower.
How to fix it
Did ROAS drop? (1) check site CR, (2) check AOV, (3) check attribution after iOS/Meta updates.
Example
A furniture store: ROAS of 2.8 looked low. Once they calculated margin (48%), they found break-even ROAS was 2.08 — they were actually profitable.
Priority
Set your break-even ROAS before raising budget: 1 / margin. Simple and critical.
Related terms
Keep learning. Metrics that touch the same area:
- Gross MarginFinance(Sale price - COGS) / sale price × 100. The basis for every pricing and advertising decision.
- eCommerce / Electronic CommerceMarketingAll business activity conducted online — showcasing products, ordering, payment, shipping, and post-sale service. The backbone of every online store.
- CPC – Cost Per ClickMarketingThe price an advertiser pays each time a visitor clicks the ad. Influenced by competition, Quality Score, and landing page relevance.
- CPM – Cost Per MilleMarketingThe cost of advertising per 1,000 ad impressions. A key metric in awareness-focused and brand-building campaigns.
- CPA – Cost Per AcquisitionMarketingThe amount it costs to get a customer to complete a desired action. A core profitability metric — if CPA exceeds gross profit, the campaign loses money.
- CAC – Customer Acquisition CostMarketingTotal marketing and sales spend divided by the number of new customers. Always compare to LTV. A healthy ratio: LTV at least 3x higher than CAC.
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