ROAS

What is ROAS?

ROAS stands for Return on Ad Spend. It measures how much revenue you generate per dollar invested in advertising. The formula: revenue divided by ad cost. A ROAS of 5 means every dollar returns five dollars in revenue.

What it means in practice

In practice, ROAS is the most common metric for evaluating advertising performance. But there are pitfalls. Platforms like Meta and Google report their own ROAS based on their own attribution models — and they're happy to take credit. True ROAS requires independent measurement. On top of that, ROAS says nothing about margin. High ROAS on a low-margin product can still be unprofitable. I always look at ROAS alongside margin data before making any budget decisions.

Why it matters

ROAS makes it possible to compare channels, campaigns, and segments against each other. It's the foundation for budget allocation. But it must be interpreted in context — together with CAC, LTV, and margin. On its own, it gives an incomplete picture.

Common mistakes

• Blindly trusting the platform's reported ROAS without verifying with your own data
• Comparing ROAS across channels without adjusting for attribution model
• Ignoring margin — high ROAS doesn't automatically mean profit