ROAS, short for Return on Ad Spend, measures how much revenue a campaign brings in relative to what was spent on it. The formula is simple:
ROAS = Revenue from Ads รท Ad Spend
If you spend $500 on ads and generate $2,000 in sales, your ROAS is 4x, meaning you earned four dollars for every dollar invested. It can also be expressed as a ratio (4:1) or a percentage (400%), depending on how you prefer to report it.
It’s one of the most direct ways to evaluate advertising performance. While metrics like CTR and CPM tell you how an ad is being received, ROAS cuts straight to the bottom line and tells you whether your spend is actually paying off. Most advertisers use it as a primary benchmark when deciding where to scale and where to cut back.
Keep in mind that a “good” ROAS varies by industry and profit margins, a common starting benchmark is 4x, but high-margin products can sustain lower ratios, while low-margin ones may need significantly higher returns to stay profitable.