What Is ROAS? Revenue Per Pound of Ad Spend

In plain English

Revenue divided by ad spend, usually expressed as a ratio. It is the standard measure of paid media efficiency and it ignores margin entirely.

A four-to-one return on a product with twenty percent margin loses money. Which is why ROAS targets have to be set from the margin, not from a figure someone read in a case study.

What to know

Revenue over spend

A ratio, not a profit figure.

Ignores margin

And ignores delivery cost.

Platform-reported

Which means attributed, not necessarily incremental.

Break-even is calculable

From your own gross margin.

Why it matters

The first useful exercise is working out your break-even ROAS from margin. Everything above it is profit; everything below it is buying revenue at a loss, however good the ratio looks.

Common mistakes

×Adopting a ROAS target from someone else's business.

×Ignoring gross margin when setting the target.

×Treating platform-reported ROAS as incremental.

×Optimising ROAS upward while total profit falls.

FAQs

What is a good ROAS?

Above your break-even, which depends entirely on your margin.

Why does high ROAS sometimes mean shrinking sales?

Because the highest returns come from the smallest, warmest audiences.

WRITTEN BY TARIQ SALLAM

Marketing Consultant. Entrepreneur. Content Creator.

I'm a marketing consultant, entrepreneur and content creator. I help businesses grow through practical marketing, websites, SEO, content and AI.

More About Tariq →