Find out if your ad spend is actually making money — or quietly bleeding your budget dry.
Your ads dashboard says things are going well. But are they? You see clicks, impressions, even some conversions — yet your bank account tells a different story. That gap between "looks good" and "actually profitable" is exactly what ROAS measures.
ROAS (Return on Ad Spend) tells you how many dollars you earn back for every dollar you put into ads. A 5x ROAS means every $1 you spend generates $5 in revenue. No vanity metrics, no fuzzy math — just a direct line between your ad budget and the revenue it produces.
If you are running paid campaigns on Google, Meta, or TikTok, this is the number that tells you whether your money is working hard enough or just working.
The math takes about three seconds:
ROAS = Revenue from Ads ÷ Cost of Ads
Say you spent $2,000 on Facebook Ads last month and those campaigns brought in $10,000. Your ROAS is $10,000 / $2,000 = 5x. Five dollars back for every dollar spent. One thing to watch: only count the revenue your ads actually drove, not your total store revenue. Your ad platform's conversion tracking handles this for you.
Here is where it gets important, though — ROAS does not factor in product costs, shipping, or overhead. A 5x ROAS does not mean 5x profit. If your margins are thin, that impressive-looking ROAS could still be losing you money. That is exactly why you need to understand your margins before you scale.
"Is my ROAS good?" is the wrong question. The right one: "Is my ROAS profitable given my margins?" A skincare brand with 70% margins can celebrate a 2x ROAS. A consumer electronics brand with 15% margins would be bleeding cash at that same number. That said, you need a starting point, so here are the benchmarks worth knowing:
Stuck below 2x? Do not throw more money at it. That is a signal to fix your foundation first — your ad creative, your targeting, and especially your landing pages.
The fastest way to boost ROAS without spending another dollar on ads is to improve your conversion rate optimization strategy. A store converting at 3% instead of 1.5% effectively doubles your ROAS overnight. And if you want to stop depending so heavily on paid channels, ecommerce SEO builds a traffic engine that does not charge you per click.
Here is a mistake that costs ecommerce founders real money: treating ROAS and ROI as the same thing. They are not. ROAS asks, "How much revenue did my ads bring in?" ROI asks, "Did I actually make a profit?"
ROAS only looks at ad spend versus revenue. ROI factors in everything — product costs, shipping, overhead, and the ad spend itself. The formula: (Profit − Total Investment) / Total Investment. This is why you can have a 6x ROAS that looks incredible on a dashboard but still delivers a negative ROI once you account for thin margins and high fulfillment costs.
The practical rule: use ROAS for daily campaign decisions — which ads to scale, which to kill. Use ROI for the bigger question — is this channel, this product, this strategy actually putting money in your pocket? You need both numbers to make decisions you will not regret.
4x is the general benchmark — $4 back for every $1 spent. But "good" depends entirely on your margins. If you sell high-margin products (60%+ margins), you can profit at 2-3x. Selling low-margin goods? You may need 6x or higher just to cover costs. Always check your ROAS against your margins, not just industry averages.
Divide your ad revenue by your ad spend. That is it. Spent $1,000 on ads and made $5,000 from those campaigns? Your ROAS is 5x. The calculator above does this for you instantly and shows how you stack up against benchmarks.
ROAS tells you how much revenue your ads generated (Revenue / Ad Spend). ROI tells you if you actually profited after everything — product costs, shipping, overhead, and ad spend. You can have a strong 6x ROAS and still lose money if your margins are thin. Use ROAS for campaign-level decisions, ROI for business-level decisions.
Aim for 3-5x on Facebook Ads. The platform average hovers around 3.7x. Below 3x? Do not scale yet. Fix your ad creative, tighten your audience targeting, and improve your landing page conversion rate first. Scaling a low-ROAS campaign just burns money faster.
Maybe. With a 30% gross margin, a 3x ROAS means you are roughly breaking even — the ads paid for themselves and covered product costs, but there is nothing left for shipping, fulfillment, or overhead. Most ecommerce brands need 4x or higher for real profit. Use our break-even ROAS calculator to find your exact number.
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