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Advertising

What is ROAS (Return on Ad Spend)?

The revenue returned by an advertising investment — ROAS = revenue ÷ ad spend.

Detailed definition

A ROAS of 3x means 3 TL of revenue for every 1 TL you spend. It should not be confused with ROI: ROI measures net profit, ROAS measures revenue. A healthy ROAS depends on your margin: break-even ROAS = 1 ÷ gross margin (with a 40% margin, break-even ROAS is 2.5x). Businesses with thin margins need a higher ROAS. When acquiring new customers, a lower ROAS can be acceptable if it is balanced by customer lifetime value (LTV).

Examples

  • 10,000 TL of ad spend and 40,000 TL of revenue = 4x ROAS.

Related terms

CAC (Customer Acquisition Cost) The total cost of winning one new customer — CAC = marketing spend ÷ number of new customers. LTV (Lifetime Value) The total revenue a customer generates for the brand over their lifetime. A critical metric in subscription and e-commerce models. CPC (Cost Per Click) The advertising cost you pay for each click. It varies with the sector and the level of keyword competition. Performance Max (PMax) Google's AI-driven campaign type — it automates the whole inventory of Search, Display, YouTube, Shopping and Maps in a single campaign. Google Shopping Ads E-commerce ads that appear in Google search results with a product image, a price and the brand.
Category Advertising

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From the same category

Other terms in the Advertising category

Lead Form Ads A format in which the user fills in the form inside the ad when they click it, without going to the site. Meta Pixel JavaScript code that reports visitor behaviour on your site to Meta. Used for building audiences and conversion optimisation. CAPI (Conversions API) A way of sending conversion data to Meta from the server; it complements the browser-based Pixel. Lookalike Audience An audience of new users who resemble your existing customers; built from a customer list in Meta Ads. Retargeting (Remarketing) Showing ads again to users who visited your site but did not convert. Google Ads Google's advertising platform — Search, Display, YouTube, Shopping and PMax campaign types.
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