"Given a 10% chance of a 100 times payoff, you should take that bet every time." - Jeff Bezos
As a business, marketing campaigns can sometimes be the tool that takes a 10% opportunity and turns it into a 100 times payoff. ROAS (Return on Ad Spend) is one of the key metrics to help you get there. But it’s not always easy to know when to start, keep going, or hit pause on your ad campaigns based on revenue alone. That’s why I put together this piece—to break down what ROAS is, when to use it, and how you can use it to push your results even further.
ROAS (Return on Ad Spend ) is exactly what it sounds like—it's a simple ratio between the revenue generated and the amount you spent on your ad campaign. Basically, it's your return on investment. For example, if you spend $20,000 on ads and make $40,000 in return, your ROAS would be 200%. Here's a quick formula:
Revenue from Campaign / Amount Spent on Campaign = ROAS
So, if you spent $20,000 and made $40,000 in revenue:
$40,000 / $20,000 = 200% ROAS
Using ROAS to measure the return on your investment is a great way to understand and manage whether your campaign is meeting, under-performing or exceeding your expectations.
When Should You Care About ROAS?
If you're running any sort of ad campaign and want measure results by the amount of revenue generated , ROAS is one of the best metrics to track alongside revenue. It gives you a clear picture of how much money you're making for every dollar you spend on your campaign. So, if you spend $10,000 and get $20,000, $30,000, or $40,000 in return, your ROAS would be 200%, 300%, or 400%, respectively. So you should care about ROAS if you want to quickly figure out when your campaign is losing money, breaking even, and turning a profit!
Remember, ROAS Fluctuations are normal - especially on a daily basis
When I first started in digital marketing, I used to panic whenever ROAS fluctuated, especially during the first week of a campaign. That anxiety would peak as the end of the month approached. Here’s some advice that helped me manage those nerves and improve my campaign management—your ROAS won’t always be static. One day it might hit 300%, the next it could drop to 200%, or land somewhere in between. Performance marketing naturally has its ups and downs. Just remember that so as long as you're staying within the 200% to 400% ROAS range, your campaign is doing well and generating a solid return. Plus, you can always optimize your audiences, ads, and settings to push those results even higher. I’ll dive deeper into that in a future piece.
Here's a general ROAS benchmark you can use, but be sure to make adjustments based on data, unit economics and results you have available:
200% ROAS and beyond - You're generating a positive ROI.
100% to 200% ROAS - You're breaking even on your investment.
O to 99% ROAS - You're spending more than you're getting in return.
How Should You Use ROAS to Measure Success?
Think of your campaign like a flight—it takes off, rises, adjusts, and lands. Some days your campaign will soar, and other days it’ll dip. So how do you know if your ROAS is too high or too low, and what should you do about it? The answer depends on a few factors:
The seasonality of your market or target audience.
The supply and demand of your product.
Your brand's promotional calendar.
There are plenty of other factors that can impact your ROAS, but these three should help you get a sense of when fluctuations are likely to happen and how to react. For example, running a Black Friday campaign on Google Ads or Meta Ads is a great way to boost revenue for an e-commerce brand, but the same strategy might not work as well for a real estate agency focused on lead generation. Make sure you’re setting expectations based on real time data and upcoming events that might affect your campaign’s performance.
Final thoughts on ROAS
If you're looking for a good way to measure how well your campaign is turning ad spend into revenue, ROAS should be the metric that is at the top of your list to track. Other useful metrics to use alongside ROAS are POAS (Profit on Ad Spend), MER (Management Expense Ratio), total revenue generated, and AOV (Average Order Value) to name a few. Just remember, when it comes to ROAS, some factors are within your control, and some aren’t—so prepare as best you can to navigate through those fluctuations. In a future piece, I’ll share how you can calculate and predict these fluctuations using key metrics.
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