Return on Ad Spend (ROAS)

Return on ad spend (ROAS) measures how much revenue you earn for every dollar you spend on advertising. You calculate it by dividing the revenue generated by a campaign by its cost. The result is usually written as a ratio — a $10,000 return on $2,500 spent is a 4:1 ROAS, or 400%.

Picture a landscaping company that spends $3,000 on Google Ads and books $18,000 worth of jobs from those leads. Their ROAS is 6:1 — six dollars back for every dollar spent. That single number tells them the campaign is pulling its weight far better than counting clicks ever could.

Here is the honest caveat most guides skip: ROAS measures revenue, not profit. A 4:1 ROAS sounds great, but if your profit margin is only 20%, that $4 of revenue might contain just $0.80 of profit — before you subtract the $1 you spent to earn it. On thin margins, a "good-looking" ROAS can still lose money.

To use ROAS well:

• Know your break-even ROAS — the point where ad revenue covers ad cost plus your cost of delivering the work.
• Track revenue accurately with conversion tracking, or your ROAS is just a guess.
• Pair it with cost per lead and close rate for service businesses, where revenue lands weeks after the click.

ROAS is powerful, but only when it is honest about the difference between top-line revenue and money in your pocket.