What is ROAS? Meaning, Formula, and How to Calculate It
Also known as: Return on Ad Spend, return on adspend
Short answer
ROAS is the ratio between the revenue an ad brings in and the money you spent on that ad. A ROAS of 4 means every $1 of ad spend returned $4 in revenue. It measures gross return, not profit.
Formula
ROAS = Revenue from Ads / Ad Spend
Example
You spend $5,000 on ads and record $20,000 in sales. ROAS = 20,000 / 5,000 = 4 (or 400%).
The simple way to think about it
Treat an ad as a vending machine. You put in $1 and some amount of money comes out. ROAS is what comes out divided by what went in.
A ROAS of 1 means the machine handed your money back and nothing more. Below 1, the ad takes more than it makes.
Working the numbers
| Month | Ad spend | Revenue from ads | ROAS |
|---|---|---|---|
| July | $10,000 | $32,000 | 3.2 |
| August | $15,000 | $39,000 | 2.6 |
| September | $15,000 | $66,000 | 4.4 |
In August the spend rose but revenue did not keep pace, so ROAS fell. The ratio catches that faster than watching revenue alone.
Common mistakes
- Treating ROAS as profit. ROAS uses gross revenue. Profit appears only after cost of goods, shipping, and operating costs come out.
- Comparing ROAS across businesses. A clothing store and a dental clinic have different margins, so their healthy ROAS thresholds differ.
- Chasing the highest ROAS. The highest ROAS usually comes from the smallest audience, such as returning customers. Optimise for ROAS alone and sales volume stops growing.
- Calculating ROAS on leaking data. If half your conversions never reach the ad platform, the ROAS you see is lower than reality.
How this connects to conversion tracking
ROAS is only as accurate as the conversion data behind it. Sales that close on WhatsApp, over the phone, or in a physical shop stay invisible to the ad platform until something sends them back. Konektor captures the ad click identity and later sends the conversion, so the ROAS you read sits closer to real sales.
Frequently asked questions
- What is a good ROAS?
- There is no single number that fits every business. A good ROAS is one above your break-even ROAS. A business with a 25% margin needs a ROAS above 4 just to break even. A business with a 70% margin already profits at 1.5.
- What is the difference between ROAS and ROI?
- ROAS uses gross revenue and counts ad spend only. ROI uses profit and counts every cost, including product, shipping, and staff. A ROAS of 4 can still mean negative ROI when product margins are thin.
- Why does the ad platform report a different ROAS than my own reports?
- The ad platform counts conversions it can claim, inside its own attribution window. Your own report counts real transactions. Some gap is normal. What matters is that you use one number consistently to make decisions.
Related terms
Konektor guides
Your ad numbers are only as accurate as the data behind them
Konektor captures the Click ID and sends conversions that close on WhatsApp, over the phone, or in a shop back to the ad platform.