ROAS tells you how much reported revenue each unit of ad spend brought back. A ROAS of 4 means four rupees or dollars of attributed revenue for every one spent. It is the default success metric in Meta, Google and Amazon ads, which is exactly why it needs care: it is measured with the platform's own attribution and it ignores costs.
A high ROAS can still lose money if margins are thin, returns are high or most of the attributed sales would have happened anyway. Judge ROAS against your break-even ROAS, and check it against order data rather than platform dashboards alone.
Formula
ROAS = Ad-attributed revenue ÷ Ad spend
Example
Spend ₹2,00,000 and the platform attributes ₹8,00,000 of sales: ROAS = 8,00,000 ÷ 2,00,000 = 4.0.
The minimum ROAS and maximum CAC your unit economics can afford, with a full contribution margin waterfall.
Related terms
- Break-even ROASBreak-even ROAS is the return on ad spend at which an order covers its variable costs and its acquisition cost, leaving zero profit.
- Marginal ROASMarginal ROAS is the extra revenue generated by an increase in ad spend divided by that extra spend.
- MER (marketing efficiency ratio)MER is total revenue divided by total marketing spend across every channel.
- ACoS (advertising cost of sale)ACoS is ad spend divided by ad-attributed sales, expressed as a percentage; it is the inverse of ROAS.
- IncrementalityIncrementality is the share of results that would not have happened without a marketing activity.
Where this comes up
Operator's Notes, Issue 01: The storefront is moving, and you won't own itMeta, Google and OpenAI each made a move on who owns the moment someone decides to buy. What the agent race means for brands, the WhatsApp pricing change Indian D2C should act on, and a 60-minute agent-ready feed audit. ROAS is not a business metricReturn on ad spend tells you how the platform sees your campaigns. Contribution margin tells you whether the business is better off. Here is how to run paid media on the second. The last rupee problem: scaling on marginal returnsAverage ROAS hides the moment scaling stops paying. Marginal ROAS shows it. A practical way to find that point before your P&L does.Part of the growth marketing glossary by Shiva Sharma.