Return on ad spend

What it is

ROAS is a simple efficiency ratio: attributed revenue over media spend for a chosen campaign, channel and period. Most ad platforms calculate it automatically from conversion values passed back by tracking, and several offer target ROAS bidding, where the system adjusts bids to hit a value you set. The figure depends entirely on the attribution model and conversion window behind it.

Why it matters

ROAS is the common language for judging whether paid media is worth funding and for deciding how to split budget across campaigns, products and channels. Because it uses revenue rather than conversion counts, it suits ecommerce and any business with varying order values, where cost per acquisition hides the difference between a small and a large basket. It also feeds automated bidding, so an unrealistic target can starve campaigns of volume while a loose one can spend into unprofitable territory.

How it works

Teams calculate a breakeven ROAS from gross margin, then set targets above it to leave room for overheads and profit. They pass accurate conversion values back to the platform, ideally net of returns and discounts, and review ROAS at campaign or product group level rather than only at account level, since averages hide losers. Many pair platform ROAS with a blended figure, total revenue over total media spend, to sanity check against the accounts.

When it applies

It applies to any revenue generating paid media where order or contract value can be measured, and is less useful for brand campaigns, lead generation without value estimates, or businesses with long subscription payback.

Examples

• A shopping campaign returns £5 of attributed revenue for every £1 spent, reported as 5:1 ROAS.
• A retailer with a 40 per cent gross margin calculates breakeven at 2.5:1 and sets targets above that to cover fulfilment and overheads.
• A team switches a campaign to target ROAS bidding, sets the goal too high, and sees spend and conversions drop while the ratio improves.

How it is measured

• Platform reported ROAS by campaign, product group and audience
• Blended ROAS, total revenue over total media spend across all channels
• Breakeven ROAS derived from gross margin, and the gap between actual and breakeven
• Profit on ad spend or contribution after returns, discounts and variable costs