Definition
ROAS (Return on Ad Spend) is the revenue generated by ads divided by ad spend. A ROAS of 4 means €4 in revenue for every ad euro, but says nothing about what you actually keep.
Also called: Return on Ad Spend, Return on Advertising SpendFollow the sale through to contribution.
Same revenue. A different contribution margin changes what you can afford to spend.
01Sales value does not tell you how much is left.
How ROAS is calculated
ROAS = ad revenue / ad spend. Spend €3k and get €12k in attributed revenue, and ROAS is 4.0. The number is easy to grasp and easy to report — which is exactly why far too many companies steer by it alone.
The problem is that ROAS is a revenue metric in a world where it's profit that pays the wages. It ignores margin, shipping, returns and fees entirely.
Why ROAS deceives
A ROAS of 4 can be brilliant for a brand with a 70% margin and catastrophic for one at 25%. Same number, opposite conclusion. That's why ROAS should never stand alone as a basis for decisions.
Then there's attribution: the ROAS Meta and Google report is each platform's own crediting — often inflated, because every channel takes credit for the same sales. The blended reality looks different.
What ROAS is still good for
ROAS isn't useless. It's a quick gauge at the campaign level and fine for comparing ads on products with the same margin. But the moment you need to decide where budget goes across a range of products, POAS or contribution margin should take over.
Break-even ROAS: your own number, not the industry's
The most useful ROAS number isn't an average, it's your own break-even: the ROAS at which contribution margin exactly covers the ad cost. It's 1 divided by your margin. At a 40% margin, break-even ROAS is 2.5; at 60% it's 1.67; at 25% you have to reach 4.0 before an ad even breaks even.
That changes how a campaign reads. A ROAS of 3 is strong profit for the high-margin brand and a loss for the low-margin one — same number, opposite conclusion. So break-even ROAS is the first thing we calculate in an audit: without it, any ROAS target is a guess, and any benchmark irrelevant.
One more layer: the ROAS the platform shows is attributed and typically inflated by generous conversion windows (e.g. Meta's 7-day click / 1-day view). Your real, blended ROAS (total revenue against total spend) is almost always lower. So set the target against the blended reality, not the platform's self-congratulation.
Frequently asked questions
What is a good ROAS?
There's no single number. A good ROAS is one that leaves a positive contribution margin after all variable costs and moves you toward your growth targets. For low-margin products that can mean ROAS 5-6; for high-margin, 2 may be plenty.
Is ROAS the same as POAS?
No. ROAS measures revenue per ad euro, POAS measures profit per ad euro. POAS is the more honest metric when you're deciding on budget and scaling.
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Nicklas Segatz Mortensen
Growth hacker and fractional CMO with 10+ years' experience and hundreds of millions in managed ad spend behind him. Background from larger Danish and international scale-ups, and from the agency world.
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