ROAS Calculator

What is ROAS?

Return on ad spend measures the revenue earned for every unit of currency spent on advertising. A ROAS of 4 means each $1 of ads produced $4 of revenue. Ad platforms such as Google Ads and Meta report it per campaign, ad set or keyword, which makes it the quickest way to compare where your budget works hardest.

ROAS looks only at revenue, not profit. A campaign can show a healthy-looking ROAS and still lose money once product costs, shipping and fees are taken out – which is why the break-even ROAS below matters.

How to calculate ROAS

• ROAS = Revenue from ads ÷ Ad spend
• ROAS % = ROAS × 100
• Break-even ROAS = 1 ÷ Gross profit margin
• Target ROAS = 1 ÷ (Gross margin − Desired net profit margin)

Use revenue and spend for the same period and the same attribution window. Mixing a 7-day click window on one platform with a 28-day window on another makes ROAS figures impossible to compare.

Worked example

A campaign spends $3,000 and generates $12,000 in tracked revenue. ROAS = 12,000 ÷ 3,000 = 4.0 – written 4:1 or 400%. With a 40% gross margin, break-even ROAS is 1 ÷ 0.40 = 2.5, so the campaign is profitable: gross profit of $4,800 minus $3,000 spend leaves $1,800.

Now a second campaign: $5,000 spend and $17,500 revenue gives a ROAS of 3.5. That sounds strong, but at a 25% margin break-even ROAS is 4.0. Gross profit is $4,375, so the campaign loses $625 – a good reminder to judge ROAS against your own margin.

What is a good ROAS?

There is no universal good ROAS. A good ROAS is any figure comfortably above your break-even ROAS, which depends entirely on your margin:

High-margin products such as software or digital goods can be profitable at a low ROAS; low-margin retail needs a much higher one. Brand-awareness campaigns are often judged on reach rather than immediate ROAS.

ROAS vs ROI vs MER

ROAS and CPA are linked through average order value (AOV): ROAS = AOV ÷ CPA. With an $80 average order and a $20 cost per purchase, ROAS is 80 ÷ 20 = 4.0. Raising AOV with bundles or upsells lifts ROAS even if CPA stays the same.

How to improve ROAS

• Cut or rework ad sets and keywords that sit below break-even for several weeks.
• Raise average order value with bundles, free-shipping thresholds or upsells.
• Improve landing-page conversion rate – the same clicks then produce more revenue.
• Use negative keywords and tighter audiences to stop paying for unlikely buyers.
• Check tracking: missing conversions make ROAS look lower than it is, duplicated ones make it look higher.

Factors that affect ROAS

Seasonality, competition in the ad auction, attribution settings, product price and margin, creative fatigue and the share of new versus returning customers all move ROAS. Retargeting audiences usually show a higher ROAS than prospecting because many of those buyers would have purchased anyway – which is why incrementality tests are worth running on large budgets.

ROAS by channel: what changes

Search ads usually capture people already looking to buy, so their ROAS tends to be higher than social or display campaigns that create demand. Shopping and marketplace ads sit in between. Compare each channel with its own break-even point and with how much new business it brings, not only with each other.

Common ROAS mistakes

• Judging ROAS without knowing your margin.
• Counting revenue from returns and cancelled orders.
• Comparing platforms that use different attribution windows.
• Cutting prospecting campaigns because retargeting shows a higher ROAS – retargeting depends on prospecting to fill its audience.
• Ignoring repeat purchases when customers buy again later.

Sources

1. Google Ads Help – About Target ROAS bidding — support.google.com/google-ads/answer/6268637