marketing
ROAS (Return on Ad Spend)
Revenue generated per dollar of paid advertising. Specifically a paid-media metric.
Definition
ROAS is revenue / ad spend. $5K ad spend producing $20K revenue = 4x ROAS. ROAS is the standard inside ad platforms (Google, Meta, LinkedIn) because those platforms can attribute clicks directly to conversions. Important: ROAS is gross revenue, not profit. A 4x ROAS on a product with 25% gross margin is breakeven. The healthy benchmark depends on the product: high-margin SaaS can scale at 2-3x ROAS, low-margin retail needs 6x+ to be profitable.
In your business
- →Translate ROAS into profit ROI before scaling - 4x ROAS at 25% margin is breakeven
- →Healthy benchmark for B2B service: 4-6x ROAS minimum
- →Track per ad set, not just per channel