Return on Ad Spend (ROAS), explained properly.
What is return on ad spend (ROAS)?
Return on ad spend (ROAS) is the amount of revenue generated for every pound spent on advertising. **ROAS = Revenue from ads / Ad spend x 100** If you spend 1,000 pounds on Google Ads and generate 5,000 pounds in sales, your ROAS is 500%, or 5 pounds for every 1 pound spent.
How ROAS is calculated
The formula is (Revenue divided by Ad Spend) x 100 = ROAS%, or expressed as a ratio, Revenue divided by Ad Spend. For example, 10,000 pounds in sales from 2,500 pounds in ad spend is 4x ROAS, or 400%.
ROAS vs ROI
ROAS measures revenue relative to ad spend only. ROI accounts for all costs including product costs, fulfilment, agency fees, and overheads. A 500% ROAS sounds great, but if the product costs 80% of the sale price, the actual profit margin is thin. Always calculate your break-even ROAS, which is 1 divided by your profit margin. If your margin is 40%, your break-even ROAS is 250%. Anything above that is profitable. ROAS is easier to track in real time; ROI is the truer business metric. Most PPC accounts report ROAS for ad-level decisions and ROI for overall channel evaluation.
What is a good ROAS?
There is no universal good ROAS. It depends entirely on your margins. A business with 70% margins can be profitable at 200% ROAS. A business with 20% margins may need 600% or more to break even. A high-margin product such as jewellery, software, or services might be profitable at 200% ROAS, while a low-margin product such as commodities or low-margin retail might need 800% to break even. The right target is whatever covers all costs (ad spend, cost of goods, fulfilment, overhead) plus profit margin.
ROAS in Google Ads
Google reports ROAS in the Conversion Value / Cost column. It requires [conversion value tracking](/ppc-glossary/conversion-tracking) to be set up correctly. Our [PPC service](/services/ppc-packages) sets up conversion value tracking as a priority so ROAS reporting is accurate from day one.
Take this further
Ready to apply this to your own account? [Book a free discovery call](/discovery-call), or explore our [PPC packages](/services/ppc-packages).
Return on Ad Spend (ROAS): common questions.
Is higher ROAS always better?
Not necessarily. Pushing ROAS too high typically reduces conversion volume because the algorithm only bids when high-value conversions are likely. Sometimes a slightly lower ROAS at much higher volume produces more total profit. Optimise for total profit, not just ROAS.
How is ROAS different from CPA?
CPA measures cost per conversion; ROAS measures revenue per ad spend. CPA works for conversions of similar value such as lead generation and app installs. ROAS works for conversions of varying value such as ecommerce and lead generation with value-based scoring. Use whichever fits your business.
How do I track ROAS in Google Ads?
Conversion value tracking is the prerequisite. With value tracking in place, Google Ads automatically calculates ROAS in the Conversions column. Without it, you can only track the count of conversions, not their financial value.
Can I use Target ROAS without ecommerce?
Yes, if you assign meaningful values to lead conversions. A 200 pound average lead value on a form submission means a 400% Target ROAS would aim for a 50 pound average CPA. Smart Bidding then optimises toward higher-value lead patterns. Many B2B accounts use Target ROAS this way.
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