Return on Ad Spend (ROAS) measures revenue generated per advertising dollar spent. The median ROAS in 2024 was 2.04, ranging from 2:1 for B2B services to 6:1+ for ecommerce. Most marketers calculate it wrong, double-counting revenue across platforms, using incorrect attribution windows, and ignoring hidden costs like creative production and agency fees. This guide covers the correct formula, real industry benchmarks, and when ROAS alone isn't enough.

The ROAS Formula (And Why Most People Get It Wrong)

ROAS = Revenue from Ads ÷ Cost of Ads

Spend $2,000 on Google Ads, generate $8,000 in revenue? Your ROAS is 4:1 (also written as 400% or 4.0x, all mean the same thing).

Sounds simple. But here's where it breaks down: What counts as "revenue from ads"? Which costs do you include? What attribution window are you using? Get any of these wrong and your ROAS number is meaningless.

ROAS Calculator

Revenue from Ads: $________
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Ad Spend: $________
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Your ROAS: ________

Example: $10,000 revenue ÷ $2,500 ad spend = 4.0 ROAS (you earn $4 for every $1 spent)

Whether 4:1 is profitable depends on your margins, more on that below.

What's a "Good" ROAS? Industry Benchmarks

The "4:1 ROAS is good" advice is oversimplified. ROAS varies dramatically by industry, platform, and business model.

ROAS by Industry (2024-2025)

Source: Triple Whale analyzing 7,000+ ad accounts

Key finding: Google Search Ads deliver 20-40% higher ROAS than Meta Ads because users actively search for solutions rather than passively scrolling.

Platform Performance During Holiday Season (Nov-Dec 2024)

These benchmarks represent BFCM period when competition and costs spike:

Google Ads:

• Overall: 3.2:1
• Fashion Accessories: 4.14:1
• Baby Products: 5.05:1
• Pet Supplies: 3.8:1

Meta Ads:

• Overall: 2.79:1
• Toys & Hobbies: 3.2:1
• Sporting Goods: 2.9:1
• Food & Beverage: 2.3:1

Off-season ROAS typically runs 15-25% higher.

Don't pause Facebook just because Google delivers higher ROAS. Facebook often provides the first touchpoint that makes your Google ads work. The platforms complement each other.

The 7 Most Common ROAS Calculation Errors

1. Double-Counting Revenue Across Platforms

Each ad platform claims full credit for conversions in isolation.

Real Example:

• Google Ads reports a $200 purchase
• Facebook claims the same $200
• Pinterest attributes $200
• Reported: $600 | Actual: $200

Fix: Cross-reference platform data with actual sales from Shopify, your CRM, or accounting software.

2. Ignoring Attribution Windows

Attribution windows determine how long after an ad interaction a conversion gets credited. Facebook's default 7-day click window misses conversions for products with 14+ day consideration periods.

Fix: Extend attribution windows to match your sales cycle. B2B or high-ticket items need 28-day windows. Impulse purchases work with defaults.

3. Using Gross Revenue Instead of Net

Real Example:

• Ad spend: $5,000
• Gross revenue: $20,000 (ROAS: 4:1)
• Returns: $3,000
• Discounts: $2,000
• Net revenue: $15,000 (Actual ROAS: 3:1)

Fix: Always use net revenue after returns, refunds, and promotional codes.

4. Forgetting Indirect Costs

Ad spend is just one cost.

Complete Cost Structure:

• Direct ad spend: $10,000
• Creative production: $1,500
• Management software: $300
• Agency fees: $1,000
• Total cost: $12,800

Fix: Track all marketing costs or add a 20-30% buffer for hidden expenses.

5. Relying on Last-Click Attribution

Last-click gives all credit to the final ad, ignoring the customer journey.

Typical Journey:

1. Sees YouTube brand awareness ad
2. Clicks Facebook retargeting
3. Searches brand on Google, converts

Last-click credits only Google, making YouTube and Facebook look worthless.

Fix: Use multi-touch attribution (linear, time-decay, or data-driven) that distributes credit across touchpoints.

6. Daily ROAS Fluctuations

Making budget decisions based on 1-3 days of data creates false signals. Customers who click Monday often convert Thursday.

Fix: Analyze ROAS over 30-60 day periods. Allow time for all conversions to register.

7. Inconsistent Measurement Across Campaigns

Comparing campaigns using different date ranges or attribution settings creates false comparisons.

Fix: Standardize measurement periods and attribution windows before comparing performance.

How to Calculate Break-Even ROAS

Before setting ROAS targets, know your minimum ROAS to break even.

Formula: Break-Even ROAS = 1 ÷ Profit Margin

Example 1 (Ecommerce):

• Average order: $100
• COGS: $40
• Gross profit: $60
• Margin: 60%
• Break-even ROAS: 1 ÷ 0.60 = 1.67:1

Any ROAS above 1.67:1 is profitable.

Example 2 (Lower Margin):

• Average sale: $100
• COGS + overhead: $75
• Profit: $25
• Margin: 25%
• Break-even ROAS: 1 ÷ 0.25 = 4:1

This business needs 4:1 ROAS just to break even.

Your profit margins determine what's "good" for your business. A 3:1 ROAS is excellent for 40% margins but unprofitable for 20% margins.

Automating ROAS Tracking Across Platforms

Manually calculating ROAS across Google Ads, Facebook, TikTok, and LinkedIn is time-consuming and error-prone. You're logging into each platform, exporting CSVs, copying data into spreadsheets, and rebuilding formulas weekly.

Dataslayer connects 50+ marketing platforms to Google Sheets, Looker Studio, BigQuery, and Power BI. Your advertising cost and revenue data updates automatically, eliminating manual exports and reducing calculation errors.
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Instead of five separate dashboards, you get one source of truth that updates in real-time. This is particularly valuable for tracking blended ROAS across channels or building automated marketing reports.

If you're spending 5+ hours weekly on manual reporting, automation saves that time and gives you more accurate ROAS calculations.

When ROAS Isn't Enough: LTV, CAC, and Payback Period

ROAS measures campaign performance. It doesn't tell you if your business is profitable long-term.

The ROAS Trap

You run a Facebook campaign:

• Ad spend: $3,000
• Revenue: $12,000
• ROAS: 4:1

Looks great. But ROAS doesn't tell you:

• Product costs (COGS)
• Your profit margin
• If customers buy again
• How long until you break even
• If you can afford this acquisition cost

This is where Customer Lifetime Value (LTV), Customer Acquisition Cost (CAC), and Payback Period matter.

Customer Acquisition Cost (CAC)

CAC = (Ad Spend + Creative + Agency Fees + Software + Discounts) ÷ New Customers

Real Example:

• Marketing spend: $10,000
• Promo discounts: $3,000
• New customers: 200
• CAC: $65 per customer

For subscription businesses or repeat purchases, CAC relative to customer value matters more than immediate ROAS.

Customer Lifetime Value (LTV)

LTV = Avg Revenue per Customer × Gross Margin × Avg Lifespan

Example (Subscription):

• Monthly subscription: $50
• Gross margin: 70%
• Average stay: 18 months
• LTV: $50 × 0.70 × 18 = $630

If CAC is $65 and LTV is $630, your LTV:CAC ratio is 9.7:1 (benchmark: 3:1 or higher for sustainability).

You could have 1.5:1 first-purchase ROAS but still be highly profitable if customers make repeat purchases. Focusing only on ROAS cuts campaigns driving long-term value.

Payback Period

Payback Period = Time to recover CAC through customer revenue

Example:

• CAC: $100
• Monthly profit per customer: $25
• Payback: 4 months

Benchmarks:

• Under 6 months: Excellent, scale aggressively
• 6-12 months: Good, sustainable
• 12-24 months: Requires capital
• 24+ months: Risky unless well-funded

A long payback period means your ad spend is tied up before turning profitable, limiting reinvestment even with strong LTV:CAC.

Blended ROAS: The Full Picture

Blended ROAS = Total Revenue ÷ Total Marketing Spend (all channels)

Platform-specific ROAS can mislead. Your Facebook ad looks unprofitable (1.8:1) but when you factor in email, organic, and referrals, blended ROAS is 3.2:1.

Example:

• Google Ads: $5,000 spend, $20,000 revenue (4:1)
• Facebook: $3,000 spend, $6,000 revenue (2:1)
• Email: $500 spend, $2,000 revenue (4:1)
• Blended: $28,000 ÷ $8,500 = 3.3:1

Blended ROAS shows true multi-channel performance.

When to Use ROAS vs LTV:CAC

ROAS measures campaign performance. LTV:CAC measures business sustainability. Track both, but LTV:CAC is more important for recurring revenue businesses.

FAQ: ROAS Calculation and Measurement

What is ROAS and why does it matter?

ROAS (Return on Ad Spend) measures revenue generated per dollar spent on advertising: Revenue ÷ Ad Spend. A 4:1 ROAS means you earn $4 for every $1 spent. It matters because it shows which campaigns are profitable and which waste budget. However, ROAS depends on profit margins, a 4:1 ROAS is profitable for 40% margin businesses but loses money for 20% margins. Use ROAS to compare campaign performance, optimize ad budget allocation, and make data-driven decisions about scaling or pausing campaigns. For businesses with repeat customers, also track LTV:CAC to understand long-term profitability beyond immediate campaign returns.

How is ROAS different from ROI?

ROAS measures revenue relative to ad spend: Revenue ÷ Ad Spend. ROI measures profit relative to total investment: (Revenue - Total Costs) ÷ Total Costs. If you spend $1,000 on ads and generate $4,000 in revenue, your ROAS is 4:1. But if product costs and expenses are $3,200, your ROI is only 20%. ROAS ignores profit margins and focuses on campaign performance. ROI gives the complete business picture including COGS, overhead, and all costs. Use ROAS for optimizing campaigns and comparing platforms. Use ROI for evaluating overall profitability and strategic investments. Most marketers track ROAS daily but review ROI monthly or quarterly.

What attribution model should I use for ROAS?

Multi-touch attribution models provide the most accurate ROAS because customers interact with 4-7 touchpoints before converting. Last-click attribution (platform defaults) gives all credit to the final ad, undervaluing brand awareness and mid-funnel campaigns. For ecommerce, use data-driven attribution if you have 50+ conversions monthly, or time-decay attribution giving more weight to recent interactions. For B2B or longer sales cycles, extend attribution windows to 28-30 days minimum. The key is consistent attribution across all campaigns for apples-to-apples comparison. Google Analytics 4 and Google Ads offer data-driven attribution by default. Facebook uses last-click but allows custom windows.

Why is my ROAS different between Google Ads and Google Analytics?

Discrepancies result from different attribution models, conversion tracking methods, and data processing. Google Ads uses last-ad-click attribution and tracks conversions immediately. Google Analytics uses last-non-direct-click and may process data with delays. Other causes include different attribution windows (Google Ads 30-day vs GA4 90-day), conversion imports not configured correctly, revenue tracked differently, cross-device tracking differences, and return data processing delays. To minimize discrepancies: use GA4's data-driven attribution, ensure proper conversion tracking on both platforms, compare data over 30+ day windows (not daily), exclude refunds consistently, and import GA4 conversions to Google Ads. A 10-15% discrepancy is normal; larger differences suggest tracking issues.

How often should I check and optimize ROAS?

Check ROAS weekly but make optimization decisions based on 30-60 day trends. Daily ROAS fluctuates due to conversion delays, attribution windows, weekend effects, and small sample sizes. Making changes based on 1-3 days of data leads to poor decisions. Daily: Monitor for major issues (campaigns spending with zero conversions, broken tracking). Weekly: Review trends and identify consistently under or over-performing campaigns. Monthly: Make strategic budget reallocations, adjust bids, test new audiences, analyze blended ROAS. Quarterly: Evaluate overall strategy, calculate LTV:CAC, assess payback periods, make major budget decisions. Exception: High-volume campaigns (100+ daily conversions) can optimize more frequently. For campaigns under 50 monthly conversions, wait 60-90 days before major changes.

What should I do if my ROAS is below target?

First, verify tracking is correct, check conversion pixels, revenue data accuracy, and attribution windows. Then diagnose systematically. If below break-even (losing money): Audit in order: 1) Landing page experience (most common issue, run A/B tests), 2) Audience targeting (reaching the right people?), 3) Ad creative quality, 4) Offer strength (pricing competitive?), 5) Product-market fit (maybe the platform isn't right). For underperforming but profitable campaigns: Test incrementally, change one variable at a time. Start with creative refresh, then audience adjustments, then bid strategy. Don't pause immediately unless truly unprofitable, some campaigns contribute to blended ROAS even with low direct ROAS. Reallocate 20-30% of budget from lowest to highest performers while maintaining testing budget.

When should I focus on ROAS vs other metrics like CAC or LTV?

Focus on ROAS if you sell one-time purchases, have short sales cycles, need immediate cash flow, have low customer retention, or measure campaign efficiency. Focus on LTV:CAC if you run subscriptions, expect repeat purchases, plan long-term growth, have high customer retention, or evaluate business viability. Both metrics serve different purposes: ROAS measures campaign performance while LTV:CAC measures business sustainability. A subscription business with strong retention can accept lower ROAS (1.5:1) if customers generate high lifetime value. An ecommerce store with one-time purchases needs higher immediate ROAS (3:1+) since there's no repeat revenue. Track both metrics but prioritize based on your business model. Most successful businesses monitor ROAS weekly for campaign optimization and LTV:CAC monthly for strategic planning.

Conclusion: Calculate ROAS Correctly for Better Decisions

ROAS is essential for measuring advertising effectiveness, but most marketers calculate it wrong, overlooking attribution complexity, double-counting revenue, and ignoring indirect costs.

Three critical takeaways:

1. Platform ROAS varies dramatically: Google Ads delivers 30-50% higher ROAS than Facebook due to higher user intent, but both play different roles in your funnel
2. Your profit margins determine what's "good": 4:1 ROAS is profitable for 40% margins but loses money for 20% margins
3. ROAS alone isn't enough: Track LTV:CAC ratio and payback period to understand long-term profitability beyond campaign efficiency

Use ROAS to optimize campaigns. Use LTV:CAC to evaluate business sustainability. Track both for complete visibility.

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