ROAS Calculator
Measure the effectiveness of your advertising campaigns instantly.
What is ROAS?
ROAS stands for Return on Ad Spend. It is a marketing metric that measures the amount of revenue your business earns for each dollar it spends on advertising. For digital marketers, ROAS is one of the most critical KPIs (Key Performance Indicators) to track because it directly links advertising costs to sales performance.
The ROAS Calculation Formula
For example, if you spend $1,000 on a Google Ads campaign and it generates $5,000 in revenue, your ROAS is 5:1 (or 500%). This means for every $1 you spent, you earned $5 in revenue.
Why ROAS Matters for Your Business
While metrics like Click-Through Rate (CTR) and Cost Per Click (CPC) tell you about engagement, ROAS tells you about profitability. It allows you to:
- Identify which campaigns are driving the most value.
- Allocate budget more effectively across different platforms.
- Determine the "Break-even ROAS" needed to cover product costs and overhead.
What is a "Good" ROAS?
A common benchmark for a "good" ROAS is 4:1 ($4 revenue for every $1 spent). However, this varies wildly by industry. A high-margin luxury brand might be profitable at a 3:1 ROAS, while a low-margin grocery business might need a 10:1 ROAS to stay in the green. Always calculate your profit margins before setting your ROAS targets.
Example Calculation
Suppose an e-commerce store runs a Facebook ad campaign.
Revenue: $12,500
Ad Cost: $2,500
Calculation: $12,500 / $2,500 = 5.0
The ROAS is 5:1, meaning the campaign is highly effective.