ROAS calculation
ROAS is the conversion value your ads produced divided by what the ads cost. Google Ads reports it as “Conv. value / cost”, total conversion value divided by the total cost of ad interactions;[1] Meta’s purchase ROAS is purchase conversion value divided by amount spent;[3] Microsoft writes the formula as revenue ÷ spend.[4]
- ROAS4x
- ROAS %400%
- Profit after ads$250
- Ad cost of sales25%
ROAS as a multiple or a percentage
The same ROAS is written two ways: 4x and 400% are identical. Google Ads uses the percentage form for Target ROAS, with the example of $5 in sales for $1 in ad spend × 100% = 500%.[2] Its inverse, ad spend ÷ revenue, is called ACoS on marketplaces; a 4x ROAS is a 25% ACoS.
| Target ROAS | $500 | $1,000 | $5,000 |
|---|---|---|---|
| 1.5x (150%) | $750 | $1,500 | $7,500 |
| 2x (200%) | $1,000 | $2,000 | $10,000 |
| 3x (300%) | $1,500 | $3,000 | $15,000 |
| 4x (400%) | $2,000 | $4,000 | $20,000 |
| 6x (600%) | $3,000 | $6,000 | $30,000 |
ROAS is not profit
ROAS counts revenue, not profit, so a “good” ROAS depends on your margin. At a 30% gross margin, $5,000 of sales leaves $1,500; minus $1,250 of ads that is $250 of profit. The same 4x ROAS at a 20% margin would lose $250. The point where ads stop losing money is 1 ÷ margin: the break-even ROAS calculator works it out from unit costs, and what is a good ROAS turns it into a target with a profit goal. Textbooks define ROAS the same way and caution that it is one metric among several.[5] To forecast ROAS from a daily budget before you spend it, use the Google Ads calculator.
ROAS mistakes
- Comparing ROAS across attribution settings. A 7-day-click ROAS and a 1-day-click ROAS for the same campaign are different numbers. Keep the window fixed.
- Including tax and shipping in revenue. Conversion values that include sales tax or shipping fees overstate ROAS; use net product revenue.
- Forgetting returns. Revenue that is refunded later was never earned. Net it out or apply your return rate.
- Optimising ROAS to the ceiling. The highest ROAS often comes from the smallest budget. Total profit, from the marketing ROI calculator, can rise while ROAS falls.
Not affiliated with Google, Microsoft or Meta. Platform names are trademarks of their owners and appear only to identify whose documentation we cite.
Frequently asked questions
How do you calculate ROAS?
Revenue from ads ÷ ad spend. $5,000 ÷ $1,250 = 4, written 4x or 400%.
What does a ROAS of 3 mean?
Every $1 of ad spend brought in $3 of attributed revenue. Whether that is profitable depends on margin: at a 33.3% margin it is break-even.
How do I convert ROAS to a percentage?
Multiply by 100: 2.5x = 250%. Google Ads Target ROAS uses the percentage.
What is the difference between ROAS and ROI?
ROAS divides revenue by ad spend; ROI divides profit (after costs) by investment. A 4x ROAS can be a negative ROI if margins are thin. Use the marketing ROI calculator for ROI.
Sources
- Understand your conversion tracking data (Conv. value / cost, Cost / conv.)
- About Target ROAS bidding
- Purchase ROAS (return on ad spend)
- Report attributes and performance statistics (CTR, average CPC, conversion rate, ROAS)
- Principles of Marketing, 14.3 The Use of Metrics to Measure Advertising Campaign Effectiveness (ROAS, conversion rate)