What is ROAS (Return on Ad Spend)?

ROAS measures how many rupees (or dollars) your business earns for every rupee spent on a specific advertising source. It’s a focused efficiency metric that tells you whether an ad channel is bringing in revenue relative to its cost. Use ROAS to compare ad platforms, campaign creatives, or audience segments not as a single truth about overall profitability.

The formula

ROAS = (Revenue from ads ÷ Cost of ads) × 100

Example: If ad-driven revenue = ₹30,000 and ad spend = ₹10,000 → ROAS = (30,000 ÷ 10,000) × 100 = 300%.

Break-even ROAS

Break-even ROAS is the ROAS value at which your ad revenue exactly covers your ad spend no profit, no loss. Numerically, this equals 100% when you use the simple revenue÷cost formula. If you want to include gross margin or other costs, calculate break-even by dividing your product gross margin (as a decimal) into 1 and adjusting accordingly.

How to use this calculator

1. Enter the Ad Spend for the channel or campaign you’re evaluating.
2. Enter the Revenue that can be attributed to that same channel and time period.
3. Read the ROAS percentage and the multiplier (e.g., 3.00×).

What’s a “good” ROAS?

• ROAS < 100% means you’re losing money on ad spend.
• ROAS in the 400% (4×) range often indicates you can cover variable costs and some overhead.
• ROAS ≥ 800% (8×) is commonly cited as a strong outcome for many e-commerce setups.

How to interpret results

• High ROAS, low scale: A tiny-budget campaign can show great ROAS but not move the needle on revenue.
• Low ROAS, strategic value: Brand awareness or customer acquisition for lifetime value (LTV) may justify a lower initial ROAS.
• Compare apples to apples: Match attribution windows and reporting periods 7-day vs 28-day conversions can change numbers dramatically.

Common mistakes to avoid

• Using last-click revenue only while ignoring assisted conversions and LTV.
• Comparing ROAS across platforms without aligning the attribution model.
• Forgetting extra costs (refunds, transaction fees, creative production, agency fees) that eat into the margin ROAS suggests.

Quick tips to improve ROAS

• Tighten targeting and test high-intent audiences first.
• Optimize creative and landing pages to increase conversion value.
• Raise average order value (bundles, cross-sells) so revenue per conversion increases.
• Use remarketing to convert warmer audiences at lower acquisition cost.
• Track and optimize by funnel stage: acquisition tactics vs retention tactics have different ROAS expectations.

When ROAS is misleading

ROAS only looks at revenue relative to ad cost. It ignores customer margins, recurring revenue, and fixed overhead. For a fuller picture use:

• ROI (which accounts for all costs and profit) when you need business-level profitability.
• Customer LTV : CAC comparisons when you’re investing to build long-term value.
  Do not replace these with ROAS use them together.

Attribution and time windows

The same ad can appear to perform differently when you change the attribution window (e.g., 1-day click, 7-day click, 28-day view). Always document which attribution model you used and, when possible, evaluate performance across multiple windows to avoid false conclusions.

Practical examples (two scenarios)

1. Performance channel: Facebook ads spend ₹20,000 and tracked revenue is ₹60,000 → ROAS = 300% (3×). If product gross margin is 50%, profit after ads = (60k − 20k) × 50% = ₹20,000 healthy but check fixed costs.
2. Brand campaign: Display ads show ROAS of 120% (1.2×). That looks weak on the surface, but if the campaign increases branded organic search and LTV, judge it on multi-touch attribution and LTV uplift before pausing.

FAQs

Q1. Is ROAS the same as ROI?

A: No. ROAS measures revenue per ad rupee; ROI measures profit against total invested cost. Use ROI for business profitability analysis.

Q2. Can I calculate ROAS for a time period where revenue hasn’t arrived yet?

A: You can set a target ROAS or estimate projected revenue, but treat those numbers as provisional update them when real revenue is recorded.

Q3. What if my platform reports very different ROAS than my analytics?

A: Differences usually come from attribution settings, conversion windows, or tracking issues. Reconcile by aligning windows and checking tagging (UTMs, pixels).

Sources: OmniCalculator, Consulterce, Search Engine Land style calculator, TripleWhale, AAMfunnel, AgencyAnalytics, The Brand Amp.