Quick answer: Return on ad spend (ROAS) is the revenue generated for every pound spent on advertising, expressed as a ratio. £4 of revenue from £1 of ad spend is a 4:1 ROAS (or 400%). ROAS is the cleanest measure of paid advertising profitability, especially for ecommerce. Smart Bidding strategies like Target ROAS optimise directly toward this metric.
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 × 100
If you spend £1,000 on Google Ads and generate £5,000 in sales, your ROAS is 500%, or £5 for every £1 spent.
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: 1 divided by your profit margin. If your margin is 40%, your break-even ROAS is 250%. Anything above that is profitable.
Good ROAS Benchmarks
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%+ to break even.
ROAS in Google Ads
Google reports ROAS in the Conversion Value / Cost column. It requires conversion value tracking to be set up correctly.
Our PPC service sets up conversion value tracking as a priority so ROAS reporting is accurate from day one.
How ROAS Is Calculated
The formula: (Revenue ÷ Ad Spend) × 100 = ROAS%. Or expressed as a ratio: Revenue / Ad Spend. £10,000 in sales from £2,500 in ad spend = 4x ROAS, or 400%.
What Is a Good ROAS?
Depends entirely on margins. A high-margin product (jewellery, software, services) might be profitable at 200% ROAS. A low-margin product (commodities, low-margin retail) might need 800% to break even. The right target is whatever covers all costs (ad spend, COGS, fulfilment, overhead) plus profit margin.
ROAS vs ROI
ROAS measures revenue against ad spend only. ROI measures profit against total investment (including ad spend, COGS, overhead). 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.
Frequently Asked 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 (lead generation, app installs); ROAS works for conversions of varying value (ecommerce, 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 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 average lead value on a form submission means a 400% Target ROAS would aim for an £50 average CPA. Smart Bidding then optimises toward higher-value lead patterns. Many B2B accounts use Target ROAS this way.
Take this further
ROAS is the cleanest paid acquisition metric for accounts that track revenue. Most ecommerce accounts have hidden ROAS leverage in conversion tracking and Smart Bidding configuration.
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