# What is ROAS – Return on Ad Spend?

What is 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.

## How it works 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.

## Related metrics

- Gross Margin — minimum ROAS = 1/margin
- AOV — higher AOV means higher ROAS on the same CPC
- CPA — two sides of the same coin
- MER — an advanced version that includes all channels

## 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.

## Real-world 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.

## Where to start

Set your break-even ROAS before raising budget: 1 / margin. Simple and critical.

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Category: Marketing · From the [Jimmy OS KPI Glossary](https://jimmy-os.com/glossary/kpi.md) · Source page: https://jimmy-os.com/glossary/kpi/roas-return-on-ad-spend