GLOSSARY
What is return on ad spend (ROAS)?
Return on ad spend (ROAS) is the revenue you earn for every dollar you spend on advertising. You calculate it by dividing revenue attributed to ads by the ad spend, so 4,000 dollars of revenue from 1,000 dollars of ads is a ROAS of 4, often written 4:1. It shows whether a campaign pays for itself.
ROAS answers a direct question: is this campaign making more than it costs. A ROAS above 1 means the ads earned back more than you spent, though the level you need depends on your margins, not a universal benchmark.
ROAS measures revenue, not profit. A campaign can look healthy on ROAS while losing money once product costs, fulfilment, and overheads are counted, so read it against your margins.
For lead based businesses, ROAS depends on what happens after the click. The same ad spend produces a very different return when leads are answered fast and qualified well, which is why speed to lead and conversion sit underneath any ROAS figure.
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