ROAS, short for return on ad spend, is the revenue your ads generated divided by what you spent on them. If you spent $1,000 and the platform recorded $4,000 in sales, your ROAS is 4, which Google Ads displays as 400%. The figure only tells you whether an ad pays for itself once you compare it with your margin.
How do you calculate ROAS?
The formula is short:
ROAS = revenue attributed to ads ÷ ad spend
Say you spent $500 on ads in a week and the platform credited $1,750 in sales to them. The math is 1,750 ÷ 500 = 3.5, or 350%. Every dollar you put in came back as $3.50 of revenue.
Notice the word is revenue, not profit. ROAS ignores product cost, marketplace fees, packaging and the shipping you pay. That is why two businesses with the same ROAS can end up with opposite results.
What is a good ROAS?
There is no single good number. A good ROAS is one that sits above your own break-even point, and that point depends on the margin of each product. A seller with a 70% margin breaks even near 1.4. A seller with a 20% margin only breaks even at 5.
So be wary of rules of thumb like “ROAS 4 is great.” They work for one kind of margin and fail for another.
How do you find your break-even ROAS?
Break-even ROAS is the point where gross profit from ad-driven sales exactly covers what you spent on those ads. The formula is:
Break-even ROAS = 1 ÷ margin
Margin here means margin after variable costs: what is left of each sale after product cost, payment or marketplace fees, packaging and any shipping you absorb.
Step by step:
- Write down your average selling price. Example: $60.
- Add up variable costs per order. Example: $25 for the product plus $11 for fees, packaging and shipping, for a total of $36.
- Find what is left: 60 − 36 = $24.
- Divide that by the price to get margin: 24 ÷ 60 = 0.40, or 40%.
- Divide 1 by the margin: 1 ÷ 0.40 = 2.5.
In this example, below a ROAS of 2.5 each ad-driven sale loses money once you pay for the ad. Above it, you keep some gross profit.
What happens above and below break-even?
Using the same 40% margin, here is what is left from $1,000 of ad spend:
| ROAS | Attributed revenue | Gross profit (40%) | Result after ad spend |
|---|---|---|---|
| 2.0 | $2,000 | $800 | −$200 |
| 2.5 | $2,500 | $1,000 | $0 |
| 4.0 | $4,000 | $1,600 | +$600 |
The result after ad spend still does not subtract fixed costs such as software subscriptions, your time and taxes. In our view, a healthy target always sits above break-even, with room to cover those costs.
ROAS vs ROI vs POAS: what is the difference?
- ROAS measures revenue per dollar of media and ignores product cost.
- POAS (profit on ad spend) uses gross profit instead of revenue: gross profit ÷ ad spend. Above 1, the ads returned more profit than they cost.
- ROI looks at the whole activity: (profit − investment) ÷ investment. A campaign can have a ROAS of 3 and still a negative ROI if the margin is thin.
If you are just starting, track ROAS because the platform already shows it, but always compare it with the break-even ROAS of the product.
What is Target ROAS in Google Ads?
In Google Ads, Target ROAS is a Smart Bidding strategy where you tell Google how much conversion value you want per dollar spent, as a percentage. Wanting $5 in sales for every $1 spent is a 500% target.
A few points from Google’s help page, checked in October 2026:
- You need conversion tracking set up, with values assigned to conversions.
- For Search and Shopping campaigns, Google asks for at least 15 conversions in the past 30 days.
- The target is an average across auctions, not a guaranteed floor. A target set too high can limit your traffic.
- Changes take one to two conversion cycles to show their full effect, so avoid changing the target every day.
If your account does not have enough conversions yet, this strategy is not the best fit. To see how Google splits budget across channels, read our guide to Google Ads channel prioritization and budget caps.
Why can a high ROAS mislead you?
These are the most common traps:
- Attributed is not incremental. Branded search and retargeting often show the highest ROAS, but they may capture sales that would have happened anyway. Pause tests or holdout groups show the real added effect.
- Platforms disagree. Google Ads and Meta use different conversion windows and view-through rules, so their numbers overlap and rarely match. Compare the total with actual sales in your store or accounting.
- Returns and cancellations inflate ROAS unless conversion values are adjusted.
- First-order math ignores repeat purchases. If customers come back, your break-even can be lower. If your product is a one-time buy, do not count on it.
When is ROAS not the right metric?
If you do not yet know the real margin of your products, ROAS will give you false comfort. Work out cost per sale first. The same goes for businesses that sell services by quote, where the sale happens off the website and the ad only produces a lead: there, cost per qualified lead is more useful.
If you sell from your own store, also include the platform subscription in the math. See how that weighs in our guide to how much Shopify costs.
Frequently asked questions
Is a 400% ROAS the same as a ROAS of 4?
Yes. The platform shows a percentage, but the math is the same: 400% means $4 of revenue for every $1 spent.
Can I use ROAS to compare channels?
You can, with care. Each platform attributes sales differently, so also compare against the real sales recorded in your own system.
What break-even ROAS do I need with a 25% margin?
Divide 1 by 0.25: break-even is 4. Below that, the ad loses money before fixed costs.
Do I need a high ROAS to start advertising?
No. You need to know your break-even point and test with a small budget. ROAS tends to settle as the campaign collects data.
