ROAS (return on ad spend)
Revenue generated for each unit of currency spent on advertising, usually expressed as a ratio.
Definition
Return on ad spend divides revenue attributed to advertising by the advertising cost. If a campaign spends one hundred and brings five hundred in revenue, ROAS is five to one. It ignores other costs such as product, shipping and staff, so a high ROAS is not necessarily profitable. Break-even ROAS depends on gross margin. Attribution method also changes the number, so compare like with like and agree how it is measured. Set the break-even ratio before the campaign starts, using product margin, so the team knows what counts as success and what means losing money.
In a sentence
The team set a target ROAS based on product margin.
A high ROAS did not guarantee profit once shipping costs were counted.
Common mix-up
ROAS looks only at advertising cost; ROI looks at the full cost of the investment.
