ROAS (Return on Ad Spend) — Definition
ROAS measures how much revenue you generate for every dollar spent on advertising. If you spend $1,000 on ads and generate $5,000 in revenue, your ROAS ...
What it is
ROAS measures how much revenue you generate for every dollar spent on advertising. If you spend $1,000 on ads and generate $5,000 in revenue, your ROAS is 5:1 (or 500%). It's the core metric for evaluating paid advertising efficiency.
Why it matters
ROAS tells you plainly whether your advertising is profitable. It's the number that answers the only question that actually matters: "Is this money working?" Everything else — clicks, impressions, CPC — is context. ROAS is the verdict.
The mistake most people make
Calculating ROAS without accounting for cost of goods sold, fulfillment, or other expenses. A 3:1 ROAS sounds great until you realize your margins are 25%, at which point you're actually losing money. Know your break-even ROAS before you run a single campaign.