What is ROAS?
Return on Ad Spend (ROAS) measures the effectiveness of advertising campaigns by comparing generated revenue to advertising costs. The calculation: Revenue from advertising / Advertising costs = ROAS. A ROAS of 4:1 means: For every euro of ad spend, 4 euros of revenue are generated. ROAS is particularly central in e-commerce. Unlike ROI, ROAS does not consider product costs and margin. A "good" ROAS depends on margin - with 50% margin, ROAS must be at least 2:1 to break even. Google Ads offers "Target ROAS bidding" as an automated bidding strategy for e-commerce.
Key Points
- Calculation: Revenue / Advertising costs = ROAS
- ROAS of 4:1 means €4 revenue per €1 spend
- Break-even ROAS depends on product margin
- ROAS ≠ ROI - doesn't consider product costs
- Target ROAS bidding for e-commerce campaigns
- Industry standard: E-commerce 3:1 to 5:1, B2B higher
Practical Example
“Our Google Shopping campaign achieves a ROAS of 8:1 - for every euro of ad budget, we generate 8 euros in revenue.”
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