ROAS (Return on Ad Spend)

Definition

An advertising metric that measures the relationship of revenue to ad spend, expressed as a percentage of ad spend.

Information

ROAS comes up a lot in digital advertising, so it’s important to get comfortable with it.

Luckily, it is a simple calculation. ROAS = (Ad Revenue / Ad Cost) * 100

In terms of Google Ads metrics: ROAS = (Conversion Value / Cost) * 100

Below are some examples:

RevenueCostROAS
$5,000$1,000500%
$1,000$1,000100%
$500$1,00050%

FAQ

How to calculate ROAS?

Follow the formulas and examples above, or use the ROAS calculator below.

Do you want ROAS to be higher or lower?

Higher. Having a higher ROAS means you’re making more revenue for your ad costs.

What is the difference between ROI and ROAS?

ROAS is strictly about revenue and advertising expense. It doesn’t account for overall profitability.

ROI measures profitability, using the gross margin of products in addition to advertising cost.

Where to find ROAS in Google Ads?

In Google Ads, the “Conv. Value / Cost” metric contains the same calculation as ROAS, just not expressed as a percent. To think of it in terms of a percent, just multiply the “Conv. Value / Cost” number by 100. If this column doesn’t show up for you by default, click the “Columns” icon and select “Modify columns” from the menu.

Alternately, you could create a custom column that divides the “Revenue” metric by the “Cost” metric, and format it as a percent.

What is a good ROAS?

The answer is unique to every business, but there are three ways to think about this.

  • Good relative to your business goals:
    • What ROAS would you need to break even?
    • What ROAS would meet your minimum profit goals?
    • What ROAS are you getting from other paid channels?
  • Good relative to your competitors:
    • Are there any ROAS benchmarks for your industry?
  • Good relative to your potential:
    • What was the best ROAS in the history of your ad account?
    • How much more could you optimize your ad account, landing pages, or overall website monetization?

How to increase ROAS?

Increase revenue or decrease cost. Revenue increases could come from a higher conversion rate or larger average order size. Cost decreases could come from cutting wasteful spending or optimizing your ads effectiveness to get the same clicks for less money.

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