What Is ROAS? — Free Tool
ROAS is revenue divided by ad spend. The formula, the difference between ROAS and ROI, the break-even ROAS your margin implies, and why platform-reported ROAS overstates the truth.
Return on ad spend: revenue generated divided by the ad spend that produced it, expressed as a ratio such as 4:1. Unlike ROI it ignores costs other than media.
What it is
ROAS is how much revenue each unit of ad spend produced. It is the quickest read on whether a paid campaign is paying for itself, expressed as a ratio rather than a percentage.
How it is measured
Revenue attributed to the ads divided by the ad spend. Twenty thousand of revenue on five thousand of spend is a ROAS of 4, written 4:1. The number that gives it meaning is your break-even ROAS, which is 1 divided by gross margin: at a 40 percent margin, break-even is 2.5, so a 4:1 result is genuinely profitable while a 2:1 result is not.
Commonly misunderstood
ROAS is not ROI. It uses revenue, not profit, and its denominator contains only media, leaving out creative production, agency fees, tooling and salaries. A campaign at 4:1 with a thin margin and expensive production can lose money. The second problem is credit. Every ad platform reports the conversions it believes it influenced inside its own attribution window, including view-through, so Meta, Google and TikTok will each claim the same sale. Adding their reported revenue together routinely produces more than the business actually banked, which is why platform ROAS should be reconciled against real revenue before anyone celebrates.
When it matters
Use ROAS to compare campaigns and channels against your break-even threshold, not against each other in the abstract. When the decision is whether the whole programme is worth running, switch to ROI.
Related terms
Features
- The ROAS formula written out, with a worked example
- How to compute your break-even ROAS from gross margin
- ROAS versus ROI, and why a 4:1 ROAS can still lose money
- Why platform-reported ROAS is systematically higher than the truth
- A linked ROI calculator that accounts for costs beyond media
Frequently asked questions
What is the ROAS formula?
Revenue attributed to the ads divided by the ad spend. Twenty thousand in revenue on five thousand of spend is 4, usually written 4:1 or 400 percent.
What is break-even ROAS?
One divided by your gross margin. At a 40 percent margin, break-even ROAS is 1 / 0.4 = 2.5, so anything below 2.5 loses money on the media alone, before you count anything else.
What is the difference between ROAS and ROI?
ROAS counts only media cost in the denominator. ROI counts total investment including creative production, agency fees, tooling and staff time, and it uses profit rather than revenue in the numerator. A campaign can post a healthy ROAS and a negative ROI.
Why is my platform ROAS higher than my actual revenue suggests?
Because each platform claims credit for conversions it may only have touched. Meta, Google and TikTok all report ROAS within their own attribution windows, so their totals overlap. Summing platform-reported revenue usually exceeds what the accounts actually took.
Should ROAS use revenue or profit?
By convention revenue, which is exactly why ROAS alone should not drive budget decisions. If you can, run a margin-adjusted version by replacing revenue with gross profit and comparing against 1.
