Return on Ad Spend (ROAS)

Return on ad spend, or ROAS, tells you how much revenue you get back for every dollar you put into advertising. You calculate it by dividing the revenue your ads produced by the amount you spent on them.

Revenue from ads / Ad spend = ROAS
$3,000 revenue / $1,000 spent = 3 (often written 3x)

A ROAS of 3 means you earned three dollars in revenue for every dollar of ad spend. Higher is better, and it is one of the first numbers advertisers check to see if a campaign is working.

Here is the catch that trips up beginners. ROAS is built on revenue, not profit. A 3x ROAS sounds great, but if your product costs money to make, ship, and process, three dollars of revenue might only leave you a few cents once every cost is paid. That is why ROAS and profit are not the same thing, and why a campaign can look successful on a dashboard while the business quietly loses money.

Use ROAS to compare campaigns and spot obvious winners and losers, then check the actual profit before you scale spend. To see the difference clearly, read revenue vs profit, and for the wider picture read how paid advertising actually makes money.