Glossary
ROAS
ROAS is return on ad spend: how much revenue each unit of advertising spend brings back.
What it means
ROAS is calculated as revenue attributed to advertising, divided by the advertising spend that produced it. A ROAS of 4 means four units of revenue for each unit spent on ads. The number that matters for a decision is the break-even ROAS: the ROAS at which the advertising only just pays for the product, fees and other costs — below it, the campaign loses money even though it brings in revenue. Break-even ROAS is 1 divided by the gross margin as a decimal: a product with a 50 percent margin breaks even at a ROAS of 2. ROAS is not profit — it counts revenue, not what remains after product, shipping, fees and refunds.
Example
As an illustration, suppose a campaign spends 100 on advertising and brings in 400 of attributed revenue. Its ROAS is 4. If the product's gross margin is 25 percent, the break-even ROAS is 1 divided by 0.25, which is 4 — so this campaign breaks even exactly, earning nothing. If the margin were 50 percent, break-even would be 2, and the same campaign would be profitable. The same ROAS is a loss, a break-even, or a profit depending on the margin — which is why ROAS without margin is a misleading number.
Common misunderstandings
The most common misunderstanding is reading a high ROAS as a profit: revenue is not profit, and a campaign can have an impressive ROAS while losing money on every sale. The second is trusting the attribution — revenue attributed to an ad by the ad platform's own reporting is the platform's own claim, and platforms have an interest in claiming credit for sales.
Related terms
Learn more
- Customer Acquisition for E-commerce
- Conversion Optimization for Affiliates
- Dropshipping Profit Calculator
- ROI Calculator
- E-commerce Fundamentals
- Back to the full glossary
Last checked: 14 November 2026.
Frequently asked questions
How is ROAS calculated?
Revenue attributed to advertising divided by the advertising spend. Spend of 100 bringing in 400 of revenue is a ROAS of 4.
What is break-even ROAS?
The ROAS at which advertising only just pays for the product and its costs: 1 divided by the gross margin as a decimal. A 50 percent margin breaks even at a ROAS of 2.
Does a high ROAS mean the campaign is profitable?
Not necessarily. ROAS counts revenue, not profit — a campaign can have an impressive ROAS while losing money on every sale once product, shipping, fees and refunds are counted.
Why should I distrust the attribution in a ROAS figure?
Because the figure usually comes from the ad platform's own reporting, and the platform has an interest in claiming credit for sales that might have happened anyway.