Return on Ad Spend (ROAS)

Definition

Return on Ad Spend (ROAS) measures the revenue generated for every pound, dollar, or euro you spend on advertising. It’s expressed as a ratio: if you make €500 from €100 in ad spend, your ROAS is 5:1. In plain terms, it tells you whether your advertising is actually paying for itself and how efficiently it’s doing so.

Why It Matters

ROAS is one of the clearest indicators of advertising performance. It strips away the noise of clicks, impressions, and vanity metrics to answer a fundamental question: “Are our ads driving profitable growth?” However, there are a few considerations to keep in mind, such as ROAS measured against ROI, which we’ll discuss in a moment.

Example

Imagine a company running Google Ads for a new software product. They invest €2,000 in ads and generate €8,000 in sales directly attributed to those campaigns. That’s a ROAS of 4:1. With that insight, the business can determine which campaigns have the most successful ROAS.

Additional Insights

While ROAS is powerful, it shouldn’t be viewed in isolation. A campaign with a high ROAS might limit its scale, while one with a lower ROAS could still drive long-term value through customer lifetime revenue. It’s essential to view ROAS in relation to ROI (Return on Investment), because a high ROAS does not necessarily equate to profits. Industry benchmarks also vary. What’s considered “good” for e-commerce might not apply to B2B lead generation. The smartest marketers look at ROAS alongside other metrics like ROI, CPA (Cost per Acquisition), and CLV (Customer Lifetime Value) to get the full picture.

Bottom Line

ROAS is your advertising reality check. It keeps strategies grounded in results, not assumptions. Track it, understand it, and use it to make smarter decisions about where your marketing pounds go next.