ROAS (Return on Ad Spend) is revenue produced per dollar of ad spend. Different from ROI: ROAS isolates the ad layer, ignoring COGS, fees, agency cost, etc. The headline operational metric for performance marketers.
formula
ROAS = Ad Revenue / Ad Spend
4x ROAS = $1 spent returns $4 in revenue. Sometimes written as a percentage (400%) · same thing.
how to set target ROAS
"What's a good ROAS?" depends on margin:
- 50% gross margin → break-even ROAS = 2.0x.
- 30% gross margin → break-even ROAS = 3.3x.
- 70% gross margin (SaaS, digital) → break-even ROAS = 1.4x.
Target ROAS = break-even + profit buffer. Include agency fees, payment processing, returns to make it real.
tROAS automated bidding
Google Ads and Meta both offer tROAS strategies. Set the target 10-15% above last-30-day average; too aggressive and the campaign starves; too loose and you buy low-value conversions.
the ROAS traps
- Double-counting · same sale appears in Google AND Meta, so combined ROAS overstates by 20-40%.
- Brand-vs-prospecting confusion · brand campaigns capture already-intent users, ROAS shows 15-30x but incrementality is tiny.
- Attribution window · 7-day click vs 28-day click+view paints different pictures of the same campaign.
Example: A merchant reported 4.2x ROAS on Meta and 6.8x on Google. After unified data-driven attribution, Meta's share dropped 25%, Google's 35%. Combined was 4.6x but real was 3.2x · still profitable, but the budget allocation decision flipped.