Transparent method
The formula
Worked example
Example inputs
How to interpret the result
A 5x return on ad spend sounds like a clear win until the margin behind that revenue gets factored in. On a product with a 20% contribution margin, a 5x ROAS barely breaks even on the marketing dollar once the cost of the product itself comes out; the same ROAS on a 60%-margin product is genuinely profitable. Revenue attributed to an ad is not profit attributed to it.
Before you rely on it
What to check
Multiply the revenue by your actual contribution margin before comparing it against the ad spend, not the raw revenue figure alone.
The common error
Where people go wrong with ROAS calculator
Ranking campaigns purely by ROAS. A channel with a lower ROAS but a much higher-margin product can be more profitable in real dollars than one with a flashier ratio and thin margins behind it.
Sensitivity evidence
How attributed revenue changes the return on ad spend
| Attributed revenue | Return on ad spend | Contribution after ad spend |
|---|---|---|
| $100,000 | 4.00× | $15,000 |
| $112,500 | 4.50× | $20,000 |
| $125,000worked example | 5.00× | $25,000 |
| $137,500 | 5.50× | $30,000 |
| $150,000 | 6.00× | $35,000 |
Every input, tested
Which input moves the return on ad spend most
| Input | Tested from | To | Return on ad spend at each end | Swing |
|---|---|---|---|---|
| Attributed revenue | $112,500 | $137,500 | 4.50× to 5.50× | 1.00× (20%) |
| Advertising spend | $22,500 | $27,500 | 5.56× to 4.55× | 1.01× (20%) |
| Contribution margin | 38.0% | 42.0% | 5.00× to 5.00× | none |
Two variables at once
Return on ad spend by attributed revenue and advertising spend
| Attributed revenue \ Advertising spend | $20,000 | $25,000 | $30,000 |
|---|---|---|---|
| $100,000 | 5.00× | 4.00× | 3.33× |
| $112,500 | 5.63× | 4.50× | 3.75× |
| $125,000 | 6.25× | 5.00× | 4.17× |
| $137,500 | 6.88× | 5.50× | 4.58× |
| $150,000 | 7.50× | 6.00× | 5.00× |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Attributed revenue | $125,000 |
| Advertising spend | $25,000 |
| Contribution margin | 40.0% |
| Return on ad spend | 5.00× |
| Contribution after ad spend | $25,000 |
Where the inputs come from
Attributed revenue is the sales your ad platform or analytics assigns to the campaign, and advertising spend is the media cost for the same period. Contribution margin is the share of revenue left after direct costs such as product cost, shipping and fees, so it shows whether the revenue is actually profitable. Use the same attribution window and be aware that platforms often overstate their own contribution.
When the result stops applying
Revenue is not profit, and a high ROAS on a low-margin product can still lose money. Platform-reported figures can double count sales or credit ads for purchases that would have happened anyway. ROAS ignores lifetime value, so a campaign that acquires customers who buy again may be better than it looks, and it ignores agency and creative costs.
What to compare it with
Compare with the marketing metrics calculator for click and conversion costs, and the customer lifetime value pages for repeat revenue. The ecommerce profit calculator gives full net profit including fulfillment. The conversion rate calculator shows where the funnel loses buyers.
People also ask
Frequently asked questions
What is a good ROAS?
It depends on your margin. A 4 to 1 ROAS is a common target, but a business with a 25% margin needs at least 4 just to break even.
How do I find my break-even ROAS?
Divide 1 by your contribution margin. At a 40% margin, break-even ROAS is 2.5, and anything above it earns a profit before overhead.
Is ROAS the same as ROI?
No. ROAS is revenue divided by ad spend, while ROI accounts for all costs and profit. A campaign can have a high ROAS and a poor ROI.