Return on Ad Spend.
Learn what Return on Ad Spend means in modern search and SEO.
The revenue generated for every pound or dollar spent on advertising — the primary efficiency metric for direct response and e-commerce advertising campaigns.
Return on Ad Spend (ROAS) is the ratio of revenue generated to advertising cost. ROAS = Revenue from ads ÷ Ad spend. A ROAS of 4 means £4 of revenue generated for every £1 spent on advertising. It is the primary efficiency metric for direct response advertising campaigns and the basis of Google's Target ROAS Smart Bidding strategy.
What Is a Good ROAS?
The 'good' ROAS threshold depends entirely on gross margins. An e-commerce business with 70% gross margins needs a ROAS of only 1.43 to break even on ad spend (1 ÷ 0.70). A business with 25% gross margins needs a ROAS of 4 to break even. The minimum viable ROAS = 1 ÷ gross margin. Profit targets require ROAS above this threshold.
ROAS vs. ROI
ROAS considers only ad spend against revenue — it ignores all other costs (product, fulfilment, customer success, overheads). ROI (Return on Investment) factors in total investment against profit. A campaign can have a ROAS of 8 but negative ROI if fulfilment costs and overheads are high. ROAS is useful for campaign-level media efficiency; ROI measures overall business profitability.
Blended ROAS
Blended ROAS (sometimes called MER — Marketing Efficiency Ratio) divides total revenue by total marketing spend across all channels — not just one platform's attributed revenue. Because individual platform attribution overcounts (multiple platforms claim credit for the same conversion), blended ROAS is a more realistic measure of overall marketing efficiency and is increasingly the primary metric for DTC e-commerce brands.
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