Return on ad spend

Return on ad spend expresses how much revenue an advertising campaign generated relative to what it cost, and is one of the most widely used efficiency metrics in paid media.

The formula is revenue attributed to ads / ad spend, commonly reported as a ratio such as 4:1 (four units of revenue per one spent) or as a percentage. Most ad platforms let advertisers set bidding strategies directly against a target ROAS, automatically adjusting bids to hit that ratio across a campaign.

ROAS is useful for comparing campaigns and channels at a glance, but it depends entirely on the attribution modeling used to decide which revenue counts as attributed to ads, and platform-reported ROAS is typically inflated relative to the incremental lift the ads actually caused—something incrementality testing can reveal. A further pitfall is that ROAS looks at revenue, not profit or margin: a campaign can post an impressive ROAS on a low-margin or heavily discounted product line and still lose money, so it should be read together with customer acquisition cost and margin data, not in isolation from conversion rate trends further down the funnel.