What is Return on ad spend (ROAS)?
Return on ad spend (ROAS) is revenue generated by a campaign divided by what the campaign cost. A ROAS of 4 means four units of revenue per unit spent. It measures gross revenue efficiency, not profit, so it says nothing about whether the campaign made money once cost of goods, fees and delivery are paid.
The formula
ROAS = revenue attributed to the campaign ÷ campaign spendReported either as a multiple (4x) or a percentage (400%). Both mean the same thing.
The break-even trap
ROAS above 1 is frequently mistaken for profitability. It is not. A 1x ROAS means you got your ad money back and paid for the product, the payment fees, the support and your own time out of nothing.
The number that matters is break-even ROAS, which depends on your gross margin:
Break-even ROAS = 1 ÷ gross margin| Gross margin | Break-even ROAS | A 3x ROAS is |
|---|---|---|
| 20% | 5.0x | a loss |
| 40% | 2.5x | a thin profit |
| 70% | 1.43x | healthy |
| 90% (software) | 1.11x | very good |
A software business at 90% margin and a physical-goods business at 20% margin can post identical ROAS figures with opposite outcomes. Publish your break-even line next to the metric or the metric will be misread.
Where the number comes from matters
Ad platforms report their own ROAS, and they mark their own homework. Each platform counts a conversion it can plausibly claim, using its own attribution window and its own view-through rules, so the sum of platform-reported revenue routinely exceeds the revenue that actually arrived in your bank account.
Computing ROAS from your own revenue attribution — spend from the platform, revenue from your payment provider — gives a lower and more honest figure, and one that is consistent across platforms because a single system counted all of it.
Subscriptions break single-period ROAS
For recurring revenue, first-month ROAS understates almost every campaign, because the customer keeps paying. Compare acquisition cost against lifetime value instead, or fix a deliberate horizon — 3, 6 or 12 months — and hold every campaign to the same one.