What is ROAS and how do you read it?
ROAS is a performance marketing metric that measures the direct return of ad investment. The formula is simple: ROAS = Ad Revenue / Ad Spend. A 4x ROAS means every $1 spent produces $4 of revenue. It is the primary optimisation target on Meta Ads, Google Ads and LinkedIn Ads.
Because ROAS is measured on revenue, it doesn't guarantee profit. With product cost, shipping, refund rate and operating costs factored in, break-even ROAS is different for every business. For example, an e-commerce brand with 30% gross margin needs roughly 3.33x break-even ROAS — any campaign below that is losing money. That's why ROAS should be tracked alongside POAS (Profit on Ad Spend).
The best ways to improve ROAS: tighten audience targeting, rotate creatives faster, lift landing page conversion rate and move bidding strategies to value-based models.