ROAS CALCULATOR

What does ROAS mean?

ROAS stands for Return on Ad Spend. It is a key marketing metric that measures the revenue generated for every dollar spent on advertising initiatives.

ROAS helps businesses evaluate the effectiveness and profitability of their advertising campaigns and marketing campaign costs.

How is ROAS calculated?

ROAS (Return on Ad Spend) is calculated using the following calculation formula:

ROAS = Revenue from Ads​ / Cost of Ads

ROAS example calculation

Let’s say a business runs an online advertising campaign and wants to key metrics to measure its campaign performance.
 

1. Gather the data

• Revenue from ads: £20,000 (total sales generated from the campaign)
• Ad spend: £5,000 (total money on ads running)
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2. Apply the ROAS formula

• ROAS = 20,000 / 5,000 = 4.0
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3. Interpret the result

• A ROAS of 4.0 (or 400%) means the business earns £4 in revenue for every £1 spent on ads.
• If their profit margin is high enough, this campaign is likely profitable– marking an effective marketing strategy.
• If operating costs (COGS, shipping, product costs, etc.) are too high, they may need a higher ROAS to stay profitable.

What is a good ROAS?

A "good" ROAS depends on your industry, profit margins, advertising costs, operating costs, and business goals. However in general, a higher ROAS means more efficient advertising efforts or marketing channels.

How to calculate break-even ROAS?

Break-even ROAS is the minimum ROAS needed to avoid losing money on advertising efforts. It ensures that your ad revenue covers your costs without generating a loss.

Break-even ROAS calculations can be done using the following formula:

Break-even ROAS = 1 / Profit Margin (%)

Example break-even ROAS calculation

1. Determine your profit margin

Profit margin is calculated as:‍

Profit Margin = Revenue - Cost of Goods Sold (COGS) / Revenue

For example, if you were to sell a product for £100 and your COGS is £60, your profit margin would be: (100 - 60) / 100 = 0.40 (400%)

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2. Apply the break-even ROAS calculation formula

Break-even ROAS = 1 / 0.40 = 2.5

A break-even ROAS of 2.5 means you need to generate £2.50 in revenue for every £1 spent on ads to avoid losing money. If your actual ROAS is lower than 2.5, you’re operating at a loss.

How do you calculate ROI on advertising spend?

Return on Investment (ROI) measures the profitability of an ad campaign by comparing the net profit to the total cost of advertising. It helps businesses understand whether their marketing efforts are generating a positive return.

To calculate ROI on advertising spend, use the formula:

ROI = (Net Profit from Ads / Cost of Ads) × 100.

First, determine net profit by subtracting the Cost of Goods Sold (COGS) and spend on ads from total revenue. Then, divide net profit by the total ad cost and multiply by 100 to get the ROI percentage.

For example, if an ad campaign generates £10,000 in revenue, with £4,000 in COGS and £2,000 spent in the cost of advertising, the net profit is £4,000, resulting in an ROI of 200%.

What ROI means

• Positive ROI (>100%) → Profitable campaign
• Negative ROI (<0%) → Losing money
• Break-even ROI (0%) → No profit, no loss

Calculating ROI helps businesses evaluate advertising effectiveness and optimise spending for better profitability

What does 400% ROAS mean?

A 400% ROAS means that for every £1 spent on advertising costs or marketing campaigns, you generate £4 in revenue.

• A 400% ROAS is the same as a 4:1 ratio (i.e., £4 revenue for every £1 spent).
• If you spend £1,000 on an advertising strategy, a 400% ROAS means you made $4,000 in revenue.

Is a 400% ROAS good?

It depends on your profit margins. If your costs (e.g., production costs, operational costs, and ad spend) are too high, even a 400% ROAS may not be profitable. However, in most industries, a ROAS of 400% (or 4.0) is considered a strong return on ad spend.

Is 800% ROAS good?

An 800% ROAS means you generate £8 in revenue for every £1 spent in advertising budgets. This is typically considered excellent, but its true value depends on your profit margins and any additional costs.

What is a 10 ROAS?

A 10 ROAS (or 1000% ROAS) means that for every £1 spent on the cost of advertising, you generate £10 in revenue.

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