How to use the roas calculator
- 1Enter your total ad spend for the campaign or period, including platform and agency fees if you pay them.
- 2Enter the revenue the ads generated, as reported by your ad platform or your own sales tracking.
- 3Optionally enter your gross margin: the share of each sale left after the cost of the product.
- 4Read your ROAS, the break-even ROAS for your margin, and the profit or loss after ad spend.
- 5Change spend or revenue to test scenarios, such as what happens if you double the budget at a lower ROAS.
What ROAS means
Return on ad spend (ROAS) is the revenue you earn for every unit of currency spent on advertising. If you spend $2,500 on ads and they bring in $10,500 in sales, your ROAS is 4.2, usually written as 4.2:1 or 420%.
ROAS is the number ad platforms such as Google Ads, Meta and Amazon report, and the one you set as a "target ROAS" in automated bidding. It measures how well the ads turn spend into sales, but it says nothing about profit on its own, because it ignores what the products cost you.
ROAS = Revenue from ads ÷ Ad spend ROAS % = Revenue from ads ÷ Ad spend × 100
Break-even ROAS: the number that matters
A campaign only makes money if the gross profit on the sales it drives is more than the ad spend. Your break-even ROAS is 1 divided by your gross margin. With a 40% margin you keep $0.40 of each $1 of revenue, so you need $2.50 of revenue for every $1 of ads just to cover the ad cost.
This is why a 3:1 ROAS can be excellent for a software product with an 80% margin (break-even 1.25:1) and a loss for a reseller with a 25% margin (break-even 4:1). Work out your own break-even before judging a campaign by a benchmark.
Break-even ROAS = 1 ÷ Gross margin Profit after ads = Revenue × Gross margin − Ad spend
ROAS vs ROI
ROAS compares revenue with ad spend only. ROI (return on investment) compares profit with the total cost of an investment. A campaign with a 4.2:1 ROAS and a 40% margin earns $1,700 of profit on $2,500 of ads, an ROI of 68% on the ad spend.
Use ROAS to compare ads, audiences and channels against each other day to day. Use profit after ads, or ROI, to decide whether advertising is worth doing at all. ROI can also include costs ROAS leaves out, such as creative production, software and staff time.
ROI on ad spend % = (Revenue × Gross margin − Ad spend) ÷ Ad spend × 100
Limits of reported ROAS
Ad platforms count conversions with their own attribution windows and models, and two platforms can each claim the same sale. Some of the sales they report would have happened anyway, for example from people who already knew your brand. Compare platform ROAS with the revenue you can see in your own store or accounts.
Revenue here should be what you actually keep from the sale: exclude sales tax or VAT you collect for the government, and subtract refunds and returns where you can. In the UK and EU, shop prices usually include VAT, so take it out before dividing by ad spend.
Worked example
An online store spends $2,500 on social ads in a month. The ads drive $10,500 in sales, and the store earns a 40% gross margin.
| Ad spend | $2,500.00 |
| Revenue from ads | $10,500.00 |
| ROAS | 4.2:1 (420%) |
| Gross margin | 40% |
| Break-even ROAS | 2.5:1 (250%) |
| Gross profit on ad sales | $4,200.00 |
| Profit after ad spend | $1,700.00 |
The campaign is profitable: it clears the 2.5:1 break-even ROAS and leaves $1,700 after paying for the ads, a 68% return on the ad spend. Revenue would have to fall below $6,250 for the ads to lose money.