What does ROAS mean?
ROAS stands for Return On Ad Spend: how much revenue you earn back per euro spent on ads. Formula: revenue ÷ ad spend. ROAS of 4 = €4 revenue per €1 budget.
ROAS is the most common metric in e-commerce and online advertising, precisely because the calculation is straightforward. But that simplicity hides a catch: ROAS says nothing about profitability. A ROAS of 6 sounds excellent, until you discover your margin is 12% and you are still losing money on every sale.
ROAS vs ROI: the difference
ROAS only looks at revenue and ad spend. ROI looks at profit and all costs (production, fulfilment, overhead). ROAS is a fast channel metric, ROI is a business metric.
In practice: a webshop with €10,000 ad budget and €50,000 revenue has ROAS 5. But if purchase costs are €35,000 and fulfilment costs €8,000, the actual pre-overhead profit is only €7,000, and ROI on the ad budget is 70%, not the 400% ROAS suggests. Use ROAS for fast campaign optimisation; use ROI for strategic budget decisions.
What is a good ROAS?
Depends on your margin. With a 20% gross margin you need ROAS 5+ to break even on the campaign. Account for overhead, real break-even is often higher.
A quick rule of thumb: break-even ROAS = 1 ÷ gross margin%. At 25% margin, break-even ROAS is 4. At 40% margin, break-even ROAS is 2.5. Anything above break-even ROAS is positive, but remember this still excludes fixed costs. For new campaigns or new channels, you can temporarily accept break-even ROAS while collecting data.
Real-world example
A garden supplies webshop spends €5,000/mo on Google Shopping. Measured revenue: €22,000. ROAS = 4.4. Gross margin is 28%, so break-even ROAS is 3.6, the campaign is profitable. Analysis reveals the campaign misses offline orders (customers search online, then call). After linking CRM data, measured revenue rises to €29,000 and ROAS to 5.8. Same campaign, better insight.
How to measure ROAS
Google Ads: revenue is measured automatically via conversion tracking. Check that value tracking is correctly configured (pass transaction value, not a fixed value per conversion).
Formula: ROAS = total revenue from ad ÷ ad spend. In Google Ads this appears as 'Conv. value/cost' in the column selector.
For offline conversions: connect your CRM via Google Ads offline conversion import. This increases measured ROAS for B2B companies by 25–40% on average.
Common mistakes
Comparing ROAS across channels without correction: Google Search ROAS is structurally higher than TikTok ROAS because Search is bottom-of-funnel. Comparing without funnel context is misleading.
Setting a fixed conversion value: if you set €50 per lead while actual value ranges from €0 to €5,000, your campaign optimises on fictional data.
Ignoring return rates: a webshop with 25% returns has an actual ROAS of 75% of the measured figure.
Optimising too early: a campaign with fewer than 50 conversions does not have enough data for reliable ROAS conclusions.
Related terms
ROI (Return on Investment): the broader profitability metric that puts ROAS in context by including all costs.
CPA (Cost Per Acquisition): an alternative metric for campaigns without direct revenue measurement, such as B2B lead generation.
LTV (Lifetime Value): the total value of a customer over time. High LTV justifies a lower initial ROAS, you earn it back over multiple purchases.
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