Metrics
ROAS (Return on Ad Spend)
ROAS is revenue attributed to advertising divided by the cost of that advertising, expressed as a multiple such as 5x or a percentage such as 500%.
In practice
ROAS is the headline metric for e-commerce advertising. A campaign that spends $10,000 and reports $50,000 in conversion value shows a 5x ROAS. The number is only as good as the conversion value feeding it, which is why purchase tracking accuracy comes before any ROAS discussion.
Two things trip people up. First, ROAS is not profit. A 4x ROAS on a product with a 20 percent gross margin loses money after cost of goods; the same 4x on a 70 percent margin is excellent. Breakeven ROAS is 1 divided by gross margin, and every target should sit above it. Second, ROAS differs by attribution window and model, so comparing Google's ROAS to Meta's or to a Shopify dashboard is comparing three different rulers.
We report ROAS as the account reports it, per campaign and per product tier, and set targets from margin rather than from an industry average.
Why it matters
It is the number most e-commerce budgets are decided on, so it has to be measured correctly and interpreted against margin.
RELATED TERMS
Target ROAS (tROAS)
Target ROAS is a Google Ads Smart Bidding strategy that sets bids automatically to achieve an average return on ad spend you specify across a campaign or portfolio.
MER (Marketing Efficiency Ratio)
Marketing efficiency ratio is total business revenue divided by total marketing spend across all channels, measured without platform attribution.
AOV (Average Order Value)
Average order value is total revenue divided by the number of orders over a period, showing how much a typical customer spends per transaction.
Written by Ilya Bulychev, Founder, Live PPC Ads. Part of the PPC Glossary.
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