ROAS (Return on Ad Spend)
A metric measuring revenue generated for every pound or dollar spent on advertising.
Full definition
ROAS is calculated as: Revenue from Ads ÷ Ad Spend. A ROAS of 4× means you generated £4 in revenue for every £1 spent on ads. ROAS is the primary performance metric for e-commerce advertising. Target ROAS (tROAS) is also a Google Ads smart bidding strategy. The minimum acceptable ROAS depends on your business's gross margin — a 3× ROAS is excellent for a 50% margin business but insufficient for a 20% margin business. Unlike ROI, ROAS does not account for other business costs (product, fulfilment, overhead), so it should be considered alongside contribution margin rather than in isolation. Industry benchmarks vary; e-commerce averages 4:1, lead gen varies widely.
Real-world example
An online beauty brand spends £15,000 on Google Shopping ads and generates £72,000 in tracked revenue. Their ROAS is 4.8× — and since their gross margin is 55%, the campaign is highly profitable.
Related terms
The average cost spent on advertising to acquire one customer or conversion.
Read definitionThe amount an advertiser pays each time a user clicks on their ad.
Read definitionThe process of measuring specific user actions — purchases, sign-ups, calls — that represent business goals.
Read definitionThe process of crediting marketing touchpoints with conversions or sales.
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