Definition
ROAS (Return on Ad Spend) measures attributed revenue divided by ad spend. It helps compare campaigns, but it can mislead if you ignore margin, returns, fees, and attribution.
Formula
ROAS = attributed revenue / ad spend
Common mistakes
- Using ROAS without margin (profitability blind).
- Comparing ROAS across channels with different attribution windows.
- Optimizing short-window ROAS and hurting long-term LTV.
Why this matters
This term matters because it affects how you interpret performance and make budget decisions. If you use inconsistent definitions or windows, ROAS/CPA can look "better" while profit gets worse.
Practical checklist
- Write a 1-line definition for "ROAS (Return on Ad Spend)" that your team will use consistently.
- Keep the time window consistent (weekly/monthly/quarterly) when comparing trends.
- Segment results (channel/plan/cohort) before drawing big conclusions from blended averages.
- Use a calculator that references this term (e.g., ROAS Calculator) to sanity-check assumptions.
- Read the related guide (e.g., ROAS: What it is and how to use it) for context and common pitfalls.
Where to use this on MetricKit
Calculators
- ROAS Calculator: Calculate Return on Ad Spend (ROAS) and estimate contribution profit after ad spend.
- Break-even ROAS Calculator: Estimate the break-even ROAS based on contribution margin assumptions.
- Target ROAS Calculator: Estimate a target ROAS to cover variable costs plus a desired margin buffer.
- Paid Ads Funnel Calculator: Model CPM -> CTR -> CVR to estimate CPC, CPA, ROAS, and profit per 1,000 impressions (with margin and variable costs).
- Incrementality Lift Calculator: Estimate incremental conversions, incremental ROAS, and incremental profit from a holdout test.
Guides
- ROAS: What it is and how to use it: A practical guide to ROAS (Return on Ad Spend): definitions, formulas, benchmarks, and common pitfalls.
- Break-even ROAS: how to calculate it (and set a target ROAS): Learn how break-even ROAS works using contribution margin, what to include in the model, and how to turn it into a realistic target ROAS.
- Target ROAS: how to set a realistic ROAS goal: A practical guide to target ROAS: use contribution margin and allocations for fixed costs and profit to set a ROAS goal that fits your business.
- Paid ads funnel: CPM, CTR, CVR -> CPC, CPA, ROAS (with profit): A practical guide to the paid ads funnel: how CPM, CTR, and CVR drive CPC, CPA, ROAS, and profit - with formulas and common pitfalls.
- Incrementality lift: how to compute incremental ROAS from holdouts: Turn an exposed vs holdout test into incremental conversions, incremental ROAS, and incremental profit for decision-making.