What Is ROAS?
Also written as return on ad spend, return on advertising spend.
Definition
ROAS (return on ad spend) is ad revenue divided by ad spend. A 3 ROAS means 3 euros come back for every 1 euro spent. For an ecommerce store on Google Ads, ROAS is a useful steering number, but it is not profit until you compare it with your margin.
Written by Christopher Krassnig, Founder & CEO of ZenoX Media. Written by the ZenoX team from the accounts we run. Definitions are general; the numbers in examples are maths, not client results.
ROAS, Explained
Google Ads often shows ROAS as conversion value divided by cost. The same figure is sometimes shown as a percentage: 300 percent is the same as 3x. Neither version subtracts product cost, shipping, or fees. That is why two stores with the same ROAS can have opposite bank results.
The usual mistake is chasing a higher ROAS as if it were a score. Raising target ROAS can cut spend and hide products that still make money. Another mistake is judging one day. ROAS jumps around. Today's number is incomplete because sales still register after the day ends.
Read ROAS next to break-even and next to cash left. A 3x return on a 70 percent margin (break-even about 1.4) is healthy. A 5x return on a 20 percent margin (break-even 5) is only standing still. A blended account ROAS can look fine while wasters eat the profit. Split the catalog before you celebrate the number. Judge a multi-day trend, and leave today out of it.
How We Use It at ZenoX
We use ROAS to steer spend, and we judge the store by the money it keeps. On the 200+ ecom accounts we run, we read break-even ROAS before any bid target. Champions, potentials, sleepers, and wasters get read apart, because one blended ROAS hides a waster that is eating the profit.
Questions People Ask About ROAS
What Does ROAS Mean in Google Ads?
ROAS is return on ad spend: ad revenue divided by ad spend. A 3 ROAS means 3 euros back per 1 euro spent. Google may show it as a multiple or as a percentage, so 3x and 300 percent are the same. It does not subtract product cost, so it is not profit on its own.
What Is a Good ROAS for Ecommerce?
There is no universal number. Good means safely above your own break-even ROAS, which is 1 divided by gross margin. At a 40 percent margin, 2.5 breaks even. At 20 percent, you need 5. A 3x return can be great or a loss, depending on that margin. Judge cash left, not the multiple.
Related terms
- Break-Even ROASBreak-even ROAS is the return on ad spend you must hit before a sale makes any profit.
- Target ROASTarget ROAS is a Google Ads bid strategy that tries to get a return you type in, as a percentage of spend.
- CPACPA (cost per acquisition) is how much ad spend it took to get one sale.
- Average Order ValueAverage order value (AOV) is the typical amount a customer spends in one order.
Go deeper
On the call, we look at your account live. If we can grow it, we will show you how. If we cannot, we will tell you that too, and point you at someone who can.
We work with brands serious about scale. If that is you, let's talk.
