What is a good return on ad spend?
A ROAS of 3 to 5 or higher is typically considered good, though ideal targets vary by industry. E-commerce often aims for 3-5, while SaaS and lead generation may target 5 or above.
How do you calculate return on ad spend?
ROAS is calculated by dividing total revenue generated by a campaign by the total ad spend: Revenue ÷ Ad Spend. For example, $500 in revenue divided by $100 in ad spend equals a ROAS of 5.
Is ROAS the same as ROI?
No. ROAS measures revenue per advertising dollar (Revenue ÷ Ad Spend), while ROI measures profit relative to total investment (Profit ÷ Ad Spend). ROI accounts for business costs beyond advertising.
What does a ROAS of 1 mean?
A ROAS of 1 means you earned exactly $1 in revenue for every $1 spent on advertising—breaking even on ad spend alone before accounting for production costs or profit margins.
Can high ROAS mean a campaign is profitable?
Not necessarily. High ROAS measures revenue efficiency, not profitability. A campaign with high ROAS might still be unprofitable if product costs, operational expenses, or profit margins are too low.