Return On Ad Spend — revenue earned for every dollar spent on advertising.
Return On Ad Spend (ROAS) is a metric that measures the gross revenue generated for every dollar spent on advertising. ROAS = Revenue from Ads / Ad Spend. Unlike ROI (which accounts for all costs), ROAS specifically measures advertising efficiency. A ROAS of 4.0 means you earn $4 for every $1 spent on ads.
ROAS is the primary efficiency metric for paid advertising campaigns. It tells you which campaigns, ad groups, keywords, and channels are generating the most revenue per dollar spent, enabling you to allocate budget to the highest-performing activities.
Google Shopping campaign: $10,000 ad spend generates $45,000 in sales. ROAS = 4.5. Whether 4.5 is profitable depends on gross margin — a 30% margin requires ROAS of at least 3.33 to break even.
A common benchmark is 4:1 ($4 revenue per $1 spent), but it depends heavily on your margins. Low-margin products may require ROAS of 8+ to be profitable, while high-margin services may be profitable at 2:1.
CPC
Cost Per Click — the amount paid each time someone clicks on a paid advertisement.
CPA
Cost Per Acquisition — the average cost to acquire one customer or lead.
ROI
Return on Investment — net profit divided by the cost of the investment, expressed as a percentage.
Performance Marketing
Advertising where brands pay only when a specific action (click, lead, sale) occurs.