What is ROAS?
ROAS stands for Return On Ad Spend: how much revenue you generate per $1 spent on ads.
Formula: ROAS = Revenue attributed to ads ÷ Ad spend
ROAS is useful, but incomplete
- Good: fast comparison between campaigns.
- Bad: ignores margin, fees, refunds, shipping and overhead.
Break-even ROAS
The only target that matters is your break-even ROAS: the ROAS that makes your first order neither profit nor loss.
Rule of thumb: If your contribution margin is 30%, break-even ROAS ≈ 1 ÷ 0.30 = 3.33.
Read the full breakdown: Break-even ROAS.
Worked example
- AOV: $60
- Gross margin: 40%
- Fees: 5%
- Refunds: 8%
Contribution profit per order ≈ $19.32, so break-even ROAS ≈ 60 ÷ 19.32 = 3.11.
Try your numbers: ROAS + profit estimator.
Common ROAS mistakes
- Changing attribution windows and comparing ROAS anyway.
- Scaling a channel ROAS while blended economics get worse.
- Ignoring cash flow and payback.
FAQ
ROAS vs ROI?
ROAS is revenue per ad spend. ROI is profit per total cost.
Gross or net revenue?
Net revenue after refunds/returns is usually more honest.
Is high ROAS always good?
No. It can mean under-spending and leaving growth on the table.