ROAS (Return on Ad Spend) Calculator
Measure the effectiveness of your advertising campaigns instantly.
What is ROAS and Why Does it Matter?
ROAS, or Return on Ad Spend, is a vital marketing metric that measures the amount of revenue your business earns for every dollar spent on advertising. Unlike ROI (Return on Investment), which accounts for all costs including overhead and manufacturing, ROAS focuses specifically on the efficiency of your ad creative and targeting.
The ROAS Formula
Calculating your campaign performance is straightforward. The mathematical formula is:
ROAS = Gross Revenue from Ad Campaign / Cost of Ad Campaign
For example, if you spend $2,000 on Facebook Ads and generate $10,000 in sales, your ROAS is 5:1 or 500%.
ROAS vs. ROI: What's the Difference?
While often confused, they serve different purposes:
- ROAS: Measures gross revenue relative to ad spend. It tells you if your ads are driving sales.
- ROI: Measures net profit relative to total costs. It tells you if your business is actually making money after all expenses.
What is a Good ROAS?
A "good" ROAS depends heavily on your industry, profit margins, and business stage. However, a common benchmark for e-commerce is 4:1 ($4 revenue for every $1 spent).
- 2:1 ROAS: Usually the "break-even" point for many businesses once manufacturing and shipping are factored in.
- 4:1 ROAS: Generally considered a successful, profitable campaign.
- 10:1 ROAS: Exceptional performance, typical for high-intent retargeting campaigns.
Example Calculation
Imagine a Google Ads campaign for a luxury watch brand:
- Ad Spend: $1,500
- Revenue: $7,500
- Calculation: $7,500 / $1,500 = 5.0
- Result: A 500% ROAS, meaning for every $1 spent, $5 in revenue was generated.