ROAS (Return on Ad Spend)

What is ROAS?

ROAS (Return on Ad Spend) is a metric that measures the revenue generated for every dollar spent on advertising. Formula: ROAS = Ad Revenue / Ad Cost. A ROAS of 4.0 means every dollar spent returns $4 in revenue.

ROAS is a key metric in performance marketing — it allows you to evaluate the profitability of Google Ads, Meta Ads, LinkedIn Ads, and other paid channels.

Why does it matter?

• Campaign profitability — ROAS shows whether ads are making or losing money
• Budget optimization — shift budget from low-ROAS campaigns to high-ROAS ones
• Channel comparison — ROAS of Google Ads vs Meta Ads vs LinkedIn Ads
• Strategic decisions — what minimum ROAS to maintain for the business to be profitable

How to calculate ROAS?

Formula

ROAS = Campaign Revenue / Campaign Cost

Example

• Google Ads spend: $5,000
• Revenue generated: $25,000
• ROAS = 25,000 / 5,000 = 5.0 (500%)

ROAS vs ROI

• ROAS — considers ONLY ad costs
• ROI — considers ALL costs (ads + margin + operations)

Best practices

1. Set a minimum ROAS — depends on margin (50% margin → minimum ROAS of 2.0)
2. Segment ROAS — per campaign, ad group, keyword
3. Factor in LTV — a returning customer increases the real ROAS
4. Test creatives — A/B tests of ads can significantly boost ROAS
5. Optimize CPC — lower cost per click = higher ROAS at the same CTR
6. Compare with SEO — organic traffic has ROAS = infinity (no cost per click)

A comparison of ad costs and SEO in the article Google Ads vs SEO.

Related terms

• CPC — cost per click
• CTR — click-through rate
• Conversion — goal completion on a page
• A/B test — variant testing
• Landing page — campaign destination page