ROAS (Return on Ad Spend) Calculator
Measure the effectiveness of your advertising campaigns instantly.
Understanding Return on Ad Spend (ROAS)
Return on Ad Spend (ROAS) is a marketing metric that measures the amount of revenue your business earns for each dollar it spends on advertising. For digital marketers and e-commerce business owners, ROAS is one of the most critical KPIs (Key Performance Indicators) to track the profitability of specific campaigns, ad groups, or keywords.
How to Calculate ROAS
The mathematical formula for ROAS is straightforward:
Unlike ROI (Return on Investment), which accounts for all costs including overhead and manufacturing, ROAS focuses purely on the direct relationship between spend and revenue.
Real-World Example
Scenario: A boutique clothing store spends $2,000 on Facebook Ads over one month. During that month, the tracking pixel confirms that $10,000 in sales were generated directly from those ads.
Calculation: $10,000 / $2,000 = 5.0
Result: The ROAS is 5:1 or 500%. This means for every $1 spent, the business earned $5 in revenue.
What is a Good ROAS?
A "good" ROAS varies significantly by industry and profit margins. However, here are some general benchmarks:
- 2:1 (200%): Often considered the "break-even" point for many businesses once you factor in the cost of goods sold (COGS) and shipping.
- 4:1 (400%): A common target for healthy, profitable growth in e-commerce.
- 8:1 (800%) or higher: An exceptional campaign that is highly efficient.
ROAS vs. ROI: What's the Difference?
While ROAS measures revenue, ROI measures profit. If your product costs $40 to make and you sell it for $100 using $20 in ads, your ROAS is 5:1 ($100 / $20). However, your ROI would be calculated by subtracting all costs: ($100 revenue – $40 COGS – $20 ads) / $60 total cost = 66% ROI. Both metrics are essential for a full picture of business health.