What is ROAS?

What is ROAS (Return on Ad Spend)?

Definition

ROAS stands for Return on Ad Spend – a key performance metric that measures how much revenue you generate for every dollar spent on advertising.

Formula:
ROAS = Total Revenue from Advertising ÷ Total Ad Spend (Blended or Channel-Specific)

For example, if you earn $10,000 in revenue from $2,000 of ad spend, your ROAS is 5.0 (or 500%), meaning you earned $5 for every $1 spent.

Why ROAS Matters

ROAS helps brands determine whether their advertising efforts are profitable and where to focus their marketing investment. It can be viewed overall (blended across all channels) or broken down by campaign, platform (e.g. Meta, Google), or even creative.

Use Cases for ROAS

1. Budget Optimisation

Use ROAS to identify which campaigns, channels, or audiences deliver the highest return. This allows for smarter allocation of ad budgets to maximise revenue.

Example: If Google campaigns are generating a 6.0 ROAS and Meta campaigns are at 2.5, you may choose to shift more budget to Google or reassess Meta targeting or creatives.

2. Pricing Strategy

Understanding ROAS by product can help inform pricing decisions. If a product consistently shows low ROAS, it may require pricing adjustments or repositioning to improve profitability.

3. Creative Performance Evaluation

Test and compare ad creatives by ROAS to identify which visuals, messages, or formats drive better performance. Invest more in the winning creative strategies.

Good ROAS – What’s the Benchmark?

There’s no one-size-fits-all benchmark, but here are some general guidelines:

• 2.0+ ROAS: Breaking even or minimal profit (depending on margins)

• 3.0–5.0 ROAS: Healthy for most eCommerce brands

• 5.0+ ROAS: Strong performance (often seen with high-margin or well-optimised campaigns)

Remember, your ideal ROAS depends on your cost structure and business goals.

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