ROAS (Return on Ad Spend) is a return on advertising investment indicator that shows how much revenue is generated by each penny spent on advertising. The higher the ROAS, the better the advertising campaign’s effectiveness.
ROAS is calculated using the formula:
ROAS = ROAS = Revenue from the advertising campaign / Cost of the advertising campaign
| ROAS | Interpretation |
|---|---|
| Below 2:1 (200%) | Poor result – the campaign may be unprofitable after taking other costs into account |
| 2:1 – 4:1 (200% – 400%) | Average result – the campaign is probably profitable but requires optimization |
| Above 4:1 (400%) | Good result – the campaign is highly profitable and ready to scale |
Remember that the optimal ROAS depends on the industry, business model, and product margin. In the case of low margins, a higher ROAS is required for the campaign to be profitable.