Return on ad spend (ROAS) is the most quoted number in performance marketing, and one of the most misunderstood. The formula is easy; the inputs aren't.
The formula
ROAS = revenue ÷ ad spend
$5,000 of revenue from $1,000 of spend is a ROAS of 5.0×.
Three kinds of ROAS
Platform-reported ROAS
Each ad platform counts the conversions it believes it caused. Because each one sees only its own touchpoints, several platforms often claim the same sale. Add them up and you get more revenue than you actually earned.
Attributed ROAS
One system credits each sale to channels using one model across every store. Revenue is counted once, then split. This is the number to use when deciding where the next dollar goes.
Blended ROAS (or MER)
All revenue divided by all marketing spend. It can't tell channels apart, but it's a useful check: if attributed ROAS says every channel is profitable but blended ROAS is falling, something is off.
Include every store
If you sell on Amazon, Walmart or in physical stores, website-only ROAS undercounts. A channel that drives Amazon orders can look unprofitable when only Shopify revenue is counted. Bring every platform's orders in; see Amazon attribution.
Model choice moves ROAS
Under last touch, retargeting and branded search look excellent and awareness channels look weak. Under first touch, the reverse. Compare models before making budget cuts. See attribution models compared.
Getting spend in
Connect Facebook & Instagram Ads to sync spend nightly, or type spend per campaign on the Channels page. ROAS fills in on its own. See ad spend and ROAS.
Common mistakes to avoid
- Adding up platform ROAS. Several platforms claim the same sale, so their totals overstate revenue.
- Mixing time ranges. Compare revenue and spend over the same dates.
- Ignoring returns and refunds. For accurate ROAS, import net order values where possible.
- Only counting one store. Channels that drive marketplace or retail sales look worse than they are.
ROAS vs ROI
ROAS measures revenue per dollar of ad spend. ROI measures profit after all costs, including product cost, shipping and fees. A 3× ROAS can be unprofitable for a low-margin product, so set ROAS targets from your margins.
Frequently asked questions
What is a good ROAS?
It depends on margins. A break-even ROAS is 1 ÷ gross margin: with a 40% margin, you break even at 2.5×. Anything above that contributes profit.
Should I use attributed or blended ROAS for budget decisions?
Use attributed ROAS to decide between channels and blended ROAS to check the total. If they tell different stories, investigate before shifting budget.
How does the attribution model affect ROAS?
Each model credits revenue differently, so each channel's ROAS changes with the model. Compare at least two models. See attribution models compared.
Start a free trial and see attributed ROAS for every channel.