Return on Ad Spend

Return on Ad Spend (ROAS) is the most commonly used metric for measuring the direct revenue efficiency of paid advertising. It answers the question: for every dollar I put into ads, how many dollars in revenue came back?

Formula: ROAS = Revenue attributed to ads ÷ Ad spend

A ROAS of 4 means you generated $4 in revenue for every $1 spent.

ROAS vs. MER

ROAS is typically measured at the campaign or ad set level, using attribution data from the ad platform (Meta, Google, etc.). This is different from Marketing Efficiency Ratio (MER), which is calculated at the business level — total revenue divided by total marketing spend — and doesn’t rely on pixel attribution.

Because ROAS depends on the platform’s attribution model, two platforms running simultaneously will both claim credit for the same purchase, inflating your individual-channel ROAS numbers. MER doesn’t have this problem.

For D2C brands with significant ad budgets, MER is generally a more reliable north-star metric. ROAS is still useful for comparing creative or audience performance within a single platform.

What’s a Good ROAS?

There is no universal good ROAS. The breakeven ROAS depends entirely on your product margin:

• A brand with 80% gross margins breaks even at a ROAS around 1.25.
• A brand with 30% gross margins needs a ROAS of at least 3.3 to break even on the ad spend before other overhead.

The formula for breakeven ROAS is: 1 ÷ gross margin %

Brands with strong repeat purchase rates can tolerate lower ROAS on first-purchase campaigns because the customer’s lifetime value (LTV) more than compensates.

Attributed ROAS vs. True ROAS

Meta’s reported ROAS uses last-click or view-through attribution by default, which overstates the true causal impact of ads. Incrementality testing — running holdout groups — gives a more accurate picture of what revenue would have been lost without the ads.

Smart D2C advertisers use platform ROAS as a relative comparison tool (is this campaign more efficient than that one?) rather than an absolute revenue measure.