Marketing
Return on ad spend (ROAS)
Return on ad spend is the revenue earned for every dollar spent on advertising.
Formula
ROAS = Revenue attributed to ads ÷ Ad spend
Worked example
| Revenue attributed to a campaign | $30,000 |
| Spend on the campaign | $10,000 |
$30,000 ÷ $10,000 = 3.0×
Why it matters
ROAS tells you which campaigns pay for themselves. But revenue is not profit: a 3× ROAS on a 30% margin product loses money once the product is paid for.
Common mistakes
Where it misleads
Trusting platform-reported conversions alone: each platform credits itself, so totals add up to more than real sales.
Measuring ROAS on revenue instead of contribution margin.
Reading recent days as final while conversions are still being attributed.
Related terms
Keep reading
- Contribution marginContribution margin is what each sale leaves over after every cost that rises with that sale, available to cover fixed costs and profit.
- Gross marginGross margin is the share of revenue left after paying the direct costs of delivering what you sold.
Stop calculating it by hand.
Dear CFO keeps your statements, forecasts and metrics current from the systems you already run.