What Is ROAS and How to Calculate It: A Practical Guide with Real Examples

What ROAS Means

ROAS (Return on Ad Spend) measures how many units of revenue you generate for every unit spent on advertising. Formula: revenue from ads divided by ad spend.

Example: if you spend €200 on Google Ads and generate €800 in sales, your ROAS is 4. For every €1 invested, you got €4 back.

ROAS doesn't tell you if you're profitable. It tells you how efficient your ads are at generating revenue. Profitability depends on your margin.

How to Calculate ROAS

Formula: ROAS = Revenue from ads / Ad spend

Both Google Ads and Meta Ads calculate it automatically in the dashboard. On Google it appears as "Conversion value / cost". On Meta, as "Purchase ROAS".

What's a Good ROAS

There's no universally "good" ROAS — it depends entirely on your gross margin. Break-even ROAS formula: 1 / gross margin. A store with 25% margin needs ROAS 4 just to cover ad costs, before operational expenses.

From Romanian accounts we manage: eCommerce fashion 4–8, home & decor 3–6, electronics 2–4, local services 5–15.

When ROAS Is Misleading

Three situations where a high ROAS is deceptive: incorrect attribution (both Meta and Google claim the same conversion), ROAS calculated without returns/platform fees/fulfilment costs, and short-term ROAS that ignores customer lifetime value.

How to Improve ROAS

Two directions: reduce ad cost or increase order value. The fastest way to improve ROAS is often not spending less on ads but increasing average order value by 10–20% through upsells, bundles, or a free shipping threshold.