ROAS is return on ad spend, equal to the value of sales that came from your ads ÷ the amount spent on them. If you spend EGP 10,000 and the ads bring in sales worth EGP 40,000, your ROAS is 4, or 400%.
Step by step
- 1
The formula
ROAS equals the value of sales attributed to ads ÷ the amount spent, and it is written as a number such as 4 or a percentage such as 400%.
- 2
Find your break-even point
The ROAS at which you stop losing money equals 1 ÷ your profit margin before ad costs. If the margin is 25%, you need a ROAS of at least 4 to cover the cost of the ads.
- 3
Tell it apart from ROI
ROAS compares sales with ad spend alone, while return on investment, ROI, looks at profit after costs, such as the cost of goods and the ads together.
- 4
Make sure tracking is accurate
The number is only as accurate as the sales and values recorded in your pixel or tracking tool, and missing or duplicated sales distort it.
- 5
Allow for delayed conversions
Costs are recorded immediately while sales can arrive later, so do not judge on the last few days alone and review a longer period.
- 6
Think longer term
If customers buy again, they are worth more than their first order, and a low ROAS on the first order can still be acceptable.
A high ROAS does not necessarily mean profit. If your margin is thin, you can lose money even when sales exceed ad spend.
- how to calculate roas
- what does return on ad spend mean