What is Return on Ad Spend (ROAS)?

Return on ad spend (ROAS) is the revenue your store earns for every unit of currency spent on advertising. Spend $1,000 on a campaign, get $4,000 in sales from it, and your ROAS is 4.

It is the quickest efficiency check a store owner has for campaigns - and one of the easiest to misread. ROAS measures revenue, not profit. A ROAS that looks healthy in an ad dashboard can still lose money once the cost of the goods, shipping and fees are counted.

---

What Is ROAS?

ROAS compares the revenue attributed to your ads with what those ads cost. It is usually shown as a ratio (4 or 4:1) or as a percentage (400%), and it is calculated per campaign, ad set or channel as well as for all advertising combined.

The tricky part is the word attributed. Each ad platform decides which orders it gets credit for, using its own rules. Two platforms can both claim the same order, and a customer who would have bought anyway can still count as an ad conversion.

🧒 Explained simply You pay your big brother $5 to stand on the corner with a sign pointing to your lemonade stand. That afternoon, $20 of lemonade sells to people who saw the sign. Your ROAS is 4 - every $1 on the sign brought in $4. But the lemons, sugar and cups cost you $12 of that $20. After paying your brother, you made $3, not $15. ROAS counts the sales; you still have to count the costs.

---

How to Calculate ROAS

ROAS = Revenue from ads ÷ Ad spend

Example: Say a store spends $2,000 on a month of ads, and the ad platform attributes $8,000 in revenue to them.

ROAS = $8,000 ÷ $2,000 = 4

In this example, every $1 of ad spend brought in $4 of revenue.

Break-even ROAS

The number that matters most is your break-even ROAS - the point where a campaign stops losing money:

Break-even ROAS ≈ 1 ÷ Contribution margin

Here contribution margin means what is left of each sale after cost of goods, shipping and payment fees, before ad spend. If that is 25% of revenue:

Break-even ROAS ≈ 1 ÷ 0.25 = 4

A store with a 25% margin needs a ROAS of 4 just to break even. The same ROAS of 4 that looks impressive in an ad dashboard earns that store nothing.

A few variants to know:

• Platform ROAS uses the revenue each ad platform reports. It is easy to get, but platforms attribute generously.
• Blended ROAS (sometimes called MER) divides your store's total net sales by total ad spend. It ignores attribution and gives a sober overall check.
• New-customer ROAS only counts revenue from first orders, which shows whether ads actually grow your customer base.

---

Why ROAS Matters

It shows which campaigns earn their keep. Comparing ROAS across campaigns and channels tells you where to move budget, as long as you compare against your break-even point.

It ties ad spend to your margin. Working out break-even ROAS forces you to know your contribution margin, which is valuable on its own.

It catches waste fast. ROAS reacts within days when a creative tires or costs rise, long before monthly profit shows the damage.

---

What Is a Good ROAS?

There is no universal ROAS target, and any figure quoted without your margin is meaningless. A ROAS of 3 can be very profitable for a store with high margins and a loss for one with thin margins.

Work out your break-even ROAS from your contribution margin and judge campaigns against that. Anything comfortably above break-even is making money on the first order; anything below it is only worth running if those customers come back and buy again.

---

How to Improve ROAS

1. Know your break-even number first

Calculate contribution margin per product or category, then break-even ROAS for each. A campaign for a high-margin product can run at a lower ROAS than one for a low-margin product.

2. Reconcile ad numbers with real orders

Compare what each platform claims with the orders and net sales your store actually recorded in the same period. If platforms together claim more revenue than the store made, scale back your trust in them.

3. Separate new and returning customers

Ads that mostly reach existing customers often show a flattering ROAS for sales that might have happened anyway. Judge prospecting campaigns on new-customer revenue.

4. Advertise your best-margin products

Pushing products with higher margins and strong conversion lifts profit even at the same ROAS. Low-margin products may need a much higher ROAS to be worth advertising.

5. Raise average order value

Bundles and free-shipping thresholds increase revenue per order without increasing the cost of the click, which raises ROAS directly.

---

How to Track ROAS

Chartsy for Ecommerce connects to your BigCommerce store with read-only access and syncs orders, products and customers hourly. It gives you the store's real orders and net sales - with discounts, refunds, shipping and tax reported separately - to check ad-platform numbers against.

Chartsy does not have ad spend or ad attribution. Those come from your ad platforms. Use them for campaign-level ROAS, and use Chartsy's net sales and new customer counts to calculate blended ROAS and to sanity-check what the platforms claim.

• "Show net sales by month for the last 6 months"
• "How many new customers did we get each month this year?"
• "Which products had the highest net sales last month?"

Try Chartsy for Ecommerce free for 14 days →

---