What is ROAS?
ROAS, or return on ad spend, is the revenue an ad brings in divided by what it cost to run, written as a ratio such as 3.0 or a percentage such as 300%. A ROAS of 3.0 means every 1 unit of currency spent on ads returned 3 in sales; whether that is profitable depends on your margin.
Updated
How it is calculated
ROAS = conversion value (revenue attributed to the ads) / ad spend. Google Ads Help gives the example of a shoe store that wants 5 in sales for every 1 spent: 5 divided by 1, times 100%, is a 500% target ROAS. If your ad platform tracks purchases on your site, it can work this out for you; your store's own order data is the check.
Break-even ROAS for a small shop
The number that matters is your own break-even point, and it comes from margin:
- Break-even ROAS = 1 / gross margin. With a 40% margin after product cost, shipping and fees, break-even is 1 / 0.4 = 2.5.
- Below 2.5 you lose money on each sale the ad brings; above it you make some.
- Repeat buyers change the picture. If customers buy again without ads, a first-order ROAS slightly under break-even can still pay.
ROAS normally counts media spend only. Add what the creative cost when you judge a whole campaign; a cheap ad that lets you test five versions often beats one expensive shoot.
An illustrative example
Illustrative numbers for a made-up loose-leaf tea seller, Ferngully Tea: a two-week test spends 300 on a 30-second singing ad and Ads Manager attributes 960 in sales, a ROAS of 3.2. Margin is 45%, so break-even is about 2.2. The ad is profitable, and the next step is a second version with a new opening line to see if the hook can push it higher.
Common mistakes
- Comparing ROAS across platforms that use different attribution windows. Each one counts a sale under its own rules.
- Ignoring margin: a ROAS of 2 is healthy for some products and a loss for others.
- Judging after two days, when the platform is still learning and the sample is tiny.
- Counting sales that would have happened anyway, such as returning customers who were searching for you by name.
Related terms
Falling ROAS on a steady ad is often creative fatigue. A sharper call to action can lift it by sending more of the right people. To plan the creative side of the budget, see pricing and ad claims from your page, which keeps what the ad promises matched to what the page sells.
What it can't do
- ROAS shows revenue, not profit; read it next to your margin and the cost of making the ad.
What it costs
From $15 for one ad, or $59 for about 6 thirty-second video ads. Credits never expire. A jingle take costs 4 credits; a typical 30-second video ad about 26. There is no free tier and no free sample.
One-time packs
One ad
$15 once
Five ads
$59 once
Questions
- What is a good ROAS?
Anything comfortably above your break-even ROAS, which is 1 divided by your gross margin. There is no single good number for every business.
- Is ROAS the same as ROI?
No. ROAS divides revenue by ad spend only; ROI looks at profit against all costs, including product, shipping and the creative.
- Why does Ads Manager show a different ROAS from my shop dashboard?
They count sales differently. Ad platforms credit sales to ads using their own attribution rules, while your store records actual orders. Use the store for truth and the platform for comparing ads with each other.
- Should I use a target ROAS bid strategy as a small business?
It needs steady conversion data to work well. Many small accounts start with simpler bidding and move to a ROAS target once purchases come in regularly.
Sources
- Google Ads Help, About Target ROAS bidding, read 17 Oct 2026