KPIMarketing

Return on Ad Spend (ROAS)

Revenue generated for every dollar spent on paid advertising

What is Return on Ad Spend (ROAS)?

Return on ad spend is the amount of revenue generated for every unit of currency spent on advertising. It is a simple ratio that shows how productive an ad budget is.

It is widely used in performance marketing and eCommerce to judge campaigns quickly. Because it looks only at revenue and ad spend, it ignores costs such as product and delivery, so a strong ratio does not always mean a profitable one.

How this KPI is measured

Function: Marketing
Sub-function: Paid Media
Industry: All Industries
Type: Lagging
Impact: Financial control
Unit: x
Measurement frequency: Weekly / Monthly
Formula: Revenue attributed to ads / Total ad spend

How to calculate it

Divide the revenue attributed to ads by the total ad spend.

For example, if a campaign spent 4,000 and generated 16,000 of attributed revenue, the return on ad spend is 16,000 / 4,000 = 4, often written as 4x or 400%.

What counts as a good ratio depends on your margins. A business with thin margins needs a much higher ratio to break even than one with high margins, so work out your break-even ratio first.

Where it is used

Optimising campaigns
Compare the return of different campaigns, audiences and creatives and shift spend to the best.
Setting bids and budgets
Use a target ratio to guide how much can be spent to win a sale.
Reporting performance
Give a quick, comparable headline for paid channels.

How to improve it

Calculate the break-even ratioWork out the ratio at which ad spend is covered by gross margin, and treat that as the floor.
Measure by campaign and audienceSplit results so you can see what is working, not just the blended figure.
Improve conversion and order valueBetter landing pages and higher basket values raise revenue from the same spend.
Exclude low-return placementsCut audiences and placements that consistently fall below target.
Check new versus returning customersMake sure spend is winning new customers, not just paying for sales that would have happened anyway.

Tips and common mistakes

A high ratio is not always profit. Consider margin, returns and delivery costs.
Different platforms attribute sales differently, so totals across platforms can overstate real revenue.
Watch for the ratio falling as spend increases. The first pounds usually work harder than the last.

More Marketing kpi library

← All kpi library

Build better plans, faster

Join the waitlist for early access to curated insights, flexible templates, and rapid iteration across strategy, planning, and project management.