Measure the effectiveness of your digital advertising campaigns. Calculate your Return On Ad Spend.
ROAS stands for Return On Ad Spend. It is a marketing metric that measures the amount of revenue your business earns for every dollar it spends on advertising.
Unlike ROI (Return on Investment), which considers all costs (like COGS, overhead, etc.), ROAS focuses specifically on the efficiency of your ad budget. It is the single most important metric for media buyers on platforms like Facebook Ads, Google Ads, and TikTok Ads.
ROAS = Revenue from Ad / Cost of Ad
A "good" ROAS depends on your profit margins, but here are some general benchmarks:
Break Even (Usually Loss): If you make $1 for every $1 spent, you are likely losing money once you factor in product costs and shipping.
Low Profitability: You are doubling your money on ad spend, but might be breaking even overall.
Healthy: Generally considered a very profitable campaign for e-commerce.
