ROAS (Return on Ad Spend).

What is ROAS?

ROAS (return on ad spend) is the revenue generated by advertising divided by the amount spent on that advertising. If £2,000 of ads produces £8,000 in tracked sales, the ROAS is 4, often written as 4:1 or 400%.

It measures how hard each pound of ad spend is working in revenue terms, and it is the main efficiency measure for online retailers and any business that tracks the value of its sales.

Why it matters

ROAS steers many ad accounts directly, including automated bidding strategies such as target ROAS in Google Ads. That makes the target you choose powerful. Set it too high and campaigns shrink to a handful of safe sales; set it too low and you buy revenue at a loss. Knowing your break-even ROAS, based on your margins, is what turns it from a flattering headline into a sound business decision.

What moves it

• Your margins A business with thin margins needs a much higher ROAS to break even than one selling high-margin services.
• Tracking accuracy ROAS is only as reliable as the sale values recorded. Missing or duplicated sales distort it in either direction.
• Audience mix Branded searches and returning customers produce high ROAS; finding genuinely new customers usually produces lower ROAS.
• Attribution settings The longer the conversion window and the more generous the model, the more revenue ads are allowed to claim.

What to do about it

Work out your break-even ROAS by dividing one by your gross margin: a business with a 40% margin breaks even at a ROAS of 2.5. Split your reporting into branded and non-branded campaigns, and into new and returning customers where the platform allows. Judge prospecting campaigns against break-even, and expect branded campaigns to look flattering. If you sell services, import closed deal values from your CRM so ROAS reflects real revenue.