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ROAS (return on ad spend) shows how much revenue each unit of currency spent on advertising brings in. For online stores it is the main metric used to steer campaigns in Google Ads and Meta.
How do you calculate ROAS?
ROAS = revenue from ads ÷ ad spend. If €1,000 of ad spend generates €5,000 in revenue, ROAS is 5, often written as 500%.
ROAS vs. ROI
ROAS compares revenue with ad spend only. ROI looks at profit, so it also takes product costs, shipping and fees into account. A campaign can show a high ROAS and still lose money if margins are thin. The inverse of ROAS is sometimes called ACoS or cost of sale.
What is a good ROAS?
There is no universal target, because it depends on your margin. With a 50% margin, advertising breaks even at a ROAS of about 2; with a 20% margin, only at about 5. Calculate your break-even ROAS first, then set goals, for example for a target ROAS bidding strategy.
How to improve ROAS
- Measure revenue accurately with Consent Mode v2 and, if needed, server-side tracking
- Group products in campaigns by margin and sales performance
- Improve product data for Google Shopping
- Use remarketing for cart abandoners
- Raise the conversion rate of the store
Digitalman manages Shopping and Performance Max campaigns with a focus on revenue and ROAS. Learn more on our Google Ads agency page.
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