ROAS Calculator
ROAS (Return on Ad Spend) measures revenue generated per dollar spent on advertising — before subtracting cost of goods. Enter spend, revenue, and gross margin to see ROAS alongside true ROI and profit.
ROAS Calculator
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ROAS Formula
ROAS = Revenue from Ads / Ad Spend
ROAS is expressed as a ratio (e.g., 5:1) or percentage (500%). Example: $5,000 revenue from $1,000 spend = 5:1 ROAS. ROAS measures revenue efficiency; it does not subtract cost of goods sold. To get ROI, apply gross margin: Profit = Revenue × Gross Margin; ROI = (Profit − Ad Spend) / Ad Spend × 100.
When ROAS Differs from ROI
ROAS and ROI diverge when margins are below 100%. A 5:1 ROAS on 20% gross margin yields $1 of profit per $1 spent—0% ROI. At 10% margin, the same ROAS loses money. ROAS is useful for comparing ad efficiency across campaigns; ROI is required for profitability decisions. See Marketing ROI and What Is ROI? for the full picture.
Ecommerce Example
An ecommerce brand spends $20,000 on Google Ads. Revenue attributed to those ads is $80,000. ROAS = 4:1. Gross margin is 40%. Gross profit = $80,000 × 0.40 = $32,000. Profit after ad spend = $32,000 − $20,000 = $12,000. ROI = ($12,000 / $20,000) × 100 = 60%. The campaign is profitable. At 25% margin, profit would be $20,000 − $20,000 = $0—break-even.
Paid Ads Case Study
A B2B SaaS company runs LinkedIn ads at $15,000/month. Attribution (last-click, 30-day) reports $45,000 in pipeline. ROAS = 3:1. Pipeline-to-close rate is 20%; average deal size $12,000. Closed revenue = $45,000 × 0.20 × (12,000 / blended ACV) requires pipeline value modeling. If closed revenue is $30,000 and gross margin is 85%, profit = $25,500 − $15,000 = $10,500. ROI ≈ 70%. The key is connecting attributed pipeline to actual closed revenue.
Benchmark Ranges
| Industry | Typical ROAS | Notes |
|---|---|---|
| Ecommerce (D2C) | 3:1 to 5:1 | Varies by margin; 4:1 common target |
| B2B SaaS | 2:1 to 4:1 | Longer cycles; pipeline ROAS often higher |
| Lead gen | 5:1 to 15:1 | Revenue per lead × close rate |
Break-even ROAS = 1 / Gross Margin. At 30% margin, break-even ROAS = 3.33:1. See Lead Generation ROI and Email Marketing ROI for channel-specific tools.
Frequently Asked Questions
What is ROAS?
ROAS (Return on Ad Spend) is revenue generated from ads divided by ad spend. Formula: ROAS = Revenue / Ad Spend. A 5:1 ROAS means $5 revenue per $1 spent.
How does ROAS differ from ROI?
ROAS uses revenue; ROI uses profit after costs. ROAS ignores gross margin. A high ROAS can still yield negative ROI if margins are low.
What is a good ROAS?
Ecommerce often targets 3:1 to 5:1. The break-even ROAS depends on gross margin. At 30% margin, you need 3.33:1 ROAS to break even.
Should I optimize for ROAS or ROI?
Optimize for ROI (profit) when possible. ROAS is useful for revenue efficiency and quick comparison; ROI reflects true profitability.