Return on ad spend
ROAS · Revenue earned from advertising divided by ad spend; because it measures revenue rather than profit, it should be read alongside product costs.
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Why it matters
ROAS shows how many times its cost the ad spend brings back in revenue, and it is the quickest way to compare campaigns. But it looks at revenue, not profit: before product cost, shipping, returns and fees are deducted, a ROAS that looks high may still be losing money. That is why the target ROAS is worked out backwards from the profit margin.
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Example
A campaign that spends 10,000 and sells 40,000 has a ROAS of 4. If the products' margin is 20 percent, the sales earn a profit of 8,000 and the campaign is actually losing money; to break even, ROAS must be above 5.
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Common mistake
Setting one ROAS target for every product. High-margin and low-margin products break even at different points; a single target misses opportunities on some and loses money on others.
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Related terms
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