Return on Ad Spend (ROAS)
Also known as: Return on Ad Spend
ROAS (Return on Ad Spend) is the revenue you earn for every rupee spent on advertising. A ROAS of 4 means ₹4 of revenue for every ₹1 of ad spend.
ROAS is the number one efficiency metric for any paid campaign. It answers the simplest question every business owner has — 'are these ads making money or not?' — and you can check it at the channel, campaign, ad set or keyword level.
What counts as a 'good' ROAS depends fully on your margins. A business with 80% gross margin can do well even at 2x ROAS, while a low-margin retailer may need 6x or more just to break even. So always compare your ROAS against your own break-even ROAS, not some generic benchmark.
One thing to remember — ROAS measures revenue, not profit, and it only counts ad spend. Product cost, delivery and overheads are not included. For the true picture, see it together with CAC and customer lifetime value.
Formula
ROAS = Revenue from ads ÷ Ad spend
Often shown as a ratio (4:1) or multiple (4x).
Example
A campaign spends ₹50,000 and generates ₹2,00,000 in tracked sales → ROAS = 2,00,000 ÷ 50,000 = 4x.
Frequently asked questions
What is a good ROAS?
It depends on your margins. A common rule of thumb is 4x, but a high-margin software business can profit at 2x while a low-margin e-commerce store may need 6x+. Always compare against your break-even ROAS (1 ÷ gross margin).
What is the difference between ROAS and ROI?
ROAS measures revenue against ad spend only. ROI (return on investment) measures profit against total cost — product cost, salaries, overheads, everything. ROAS can look healthy even while ROI is negative.
Related terms
Customer Acquisition Cost (CAC)
CAC (Customer Acquisition Cost) is the total sales and marketing cost required to win one new paying customer over a given period.
Cost Per Click (CPC)
CPC (Cost Per Click) is the amount you pay each time someone clicks your ad. It's the core pricing model of search and many social ad platforms.
Pay-Per-Click (PPC)
PPC (Pay-Per-Click) is an advertising model where you pay a fee each time someone clicks your ad, buying visits rather than earning them organically.
Customer Lifetime Value (LTV)
LTV (Customer Lifetime Value) is the total profit a business can expect from a single customer across the entire relationship.
Conversion Rate
Conversion rate is the percentage of visitors who complete a desired action — a purchase, sign-up, or enquiry — out of everyone who had the chance to.
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