ROAS (return on ad spend) is revenue generated per unit of advertising cost: revenue attributed to ads divided by ad spend. A campaign spending €1,000 that drives €4,000 in tracked revenue has a 4× (400%) ROAS. It is the standard efficiency metric for revenue-focused campaigns.
ROAS answers "what did the money come back as?" — which makes it the default scoreboard for e-commerce and any business with trackable transaction values. But the number is meaningless without margin context. Break-even ROAS = 1 ÷ gross margin: at a 30% margin you need 3.33× just to stop losing money on the sale; at 70% margin, 1.43× breaks even. A 5× campaign can be unprofitable for a low-margin retailer while 2× prints money for a software product — "what's a good ROAS" has no universal answer, only a margin-derived one.
ROAS differs from ROI: ROAS compares revenue to ad spend alone; ROI compares profit to total cost. ROAS is the in-platform optimization metric; ROI is the business verdict.
In Google and Meta, Target ROAS bidding inverts the metric into an instruction: you declare the revenue multiple you need, the platform predicts per-auction conversion values and bids accordingly. It needs value tracking and meaningful volume (Google suggests value-based bidding works best from ~50 conversions/month); set the target near your trailing actual ROAS and tighten gradually — demanding 8× from a campaign running 3× mostly teaches the algorithm to stop spending.
Two structural caveats. Attribution inflates platform-reported ROAS: every platform claims credit generously, click-through windows differ, and the sum of platform ROAS rarely matches blended revenue ÷ blended spend — track both. And ROAS systematically undervalues new-customer acquisition: a 2× campaign acquiring first-time buyers with strong repeat rates can outearn a 6× campaign harvesting existing customers via brand and retargeting. Segment ROAS by new vs returning before judging campaigns against each other.
Store with 40% gross margin → break-even ROAS = 1 ÷ 0.40 = 2.5×. Prospecting campaign: €2,000 spend, €7,000 revenue = 3.5× — €600 gross profit after product costs. Retargeting shows 9× but mostly converts buyers who would have returned anyway; blended view keeps the budget honest.
Whatever clears your break-even (1 ÷ gross margin) with room for overhead and goals. Low-margin e-commerce often needs 4×+; high-margin software can thrive at 2×. Cross-industry 'averages' around 3–4× are context, not targets.
ROAS = revenue ÷ ad spend; ROI = profit ÷ total investment. ROAS of 3× at 30% margin is roughly ROI −10% before other costs — a campaign can look great on ROAS and still lose money. Use ROAS to steer platforms, ROI to judge the business.