ROAS calculator (return on ad spend)

ROAS shows how much revenue each unit spent on advertising returns. A ROAS of 5 means every pound spent generates five in sales.

Keep in mind that sales are not profit: to know whether the campaign makes money, compare the ROAS with what your margin demands.

The revenue attributed to the campaign is divided by what was spent on it. ROI expresses the same relationship as a net return on the investment.

ROAS and ROI answer different questions

ROAS measures how much revenue each unit of advertising spend generates. ROI measures whether the business makes money after all costs. A ROAS of 4 sounds excellent, but if your gross margin is twenty per cent you are losing money on every sale. The figure alone does not say whether the campaign is profitable.

Break-even ROAS

Divide one by your gross margin as a decimal and you get the minimum ROAS not to lose. At a thirty per cent margin, you need a ROAS of 3.33 just to cover product cost and advertising, before overheads.

Attribution changes everything

A ROAS calculated with last-click attribution assigns the whole sale to the final ad and zero to everything before it. Switching attribution model can double or halve the same figure without anything changing in reality.

New or returning customer

Selling to someone who already knows you is far cheaper. A high ROAS achieved on brand traffic does not prove the advertising is winning new customers: it may be charging for sales that would have happened anyway.