Short definition
Return on Ad Spend (ROAS) is the revenue generated for every rupee spent on advertising, calculated as revenue from ads divided by ad spend. A ROAS of 4 means ₹4 of revenue for every ₹1 spent. Whether a ROAS is profitable depends on your margins.
How to find your break-even ROAS
Break-even ROAS = 1 ÷ contribution margin (as a decimal). If each sale leaves a 40% margin after product, shipping and payment costs, break-even ROAS is 1 ÷ 0.40 = 2.5. Anything above 2.5 is profitable on the first order.
ROAS vs ROI
ROAS looks only at revenue versus ad spend. ROI includes all costs — product, fees, agency and overheads — and measures profit. A campaign can have a high ROAS and still lose money if margins are thin.
| Contribution margin | Break-even ROAS |
|---|---|
| 20% | 5.0 |
| 30% | 3.3 |
| 40% | 2.5 |
| 50% | 2.0 |
| 60% | 1.7 |