How to Calculate ROAS: A Complete Guide for PPC Marketers

ROAS (Return on Ad Spend) measures how much revenue you generate for every dollar spent on advertising. It's the core metric that answers: "Are my ads actually making money?"

The formula:

```

ROAS = Revenue from Ads ÷ Cost of Ads

```

A 4.0 ROAS means you earned $4 for every $1 spent. Simple math, but getting accurate numbers and knowing what to do with them is where most marketers struggle.

The ROAS Formula

Basic Calculation

Example Calculation

Scenario: E-commerce brand runs Google Shopping campaign for one month

• Ad spend: $5,000
• Attributed revenue: $22,500

Calculation: $22,500 ÷ $5,000 = 4.5 ROAS

For every $1 spent, $4.50 returned in revenue.

Expressing ROAS

ROAS is shown as either:

• Ratio: 4:1 (four dollars returned for every one dollar spent)
• Multiple: 4.0x or 400%

Both mean the same thing. Use whichever your team prefers.

ROAS vs. Related Metrics

ROAS vs. ROI: The Key Difference

ROAS focuses only on ad spend vs. revenue—it ignores COGS, overhead, and other costs.

ROI accounts for all costs to show actual profit.

Example:

• Revenue: $20,000
• Ad spend: $5,000
• COGS: $8,000
• Other costs: $2,000

A 4.0 ROAS can still mean low or negative profit if margins are thin.

What's a Good ROAS?

There's no universal "good" ROAS. It depends entirely on your profit margins.

Industry Benchmarks (2024)

Cross-industry average: ~2.87x (compressed by rising competition and privacy changes)

Calculating YOUR Break-Even ROAS

Benchmarks are nice, but your break-even point is what actually matters.

Formula:

```

Break-Even ROAS = 1 ÷ Profit Margin

```

Example: If your profit margin is 25%, you need at least 4.0 ROAS to break even. Anything above 4.0 is profit.

Setting Target ROAS

Your target ROAS should account for:

Calculating ROAS by Campaign Type

E-commerce (Direct Revenue)

Straightforward—revenue is directly tracked.

```

ROAS = Attributed Revenue ÷ Ad Spend

```

Tracking requirements:

• Pixel/tag on purchase confirmation page
• Revenue value passed with conversion
• Proper attribution window set

Lead Generation (Estimated Revenue)

Leads don't have immediate revenue, so you must estimate value.

Step 1: Calculate lead value

```

Lead Value = Customer LTV × Lead-to-Customer Conversion Rate

```

Example:

• Average customer LTV: $4,000
• Lead-to-customer rate: 5% (1 in 20 leads converts)
• Lead value: $4,000 × 0.05 = $200 per lead

Step 2: Calculate ROAS

```

ROAS = (Number of Leads × Lead Value) ÷ Ad Spend

```

Example:

• Leads generated: 50
• Lead value: $200
• Ad spend: $2,500
• ROAS: (50 × $200) ÷ $2,500 = 4.0x

SaaS/Subscription (LTV-Based)

For subscription businesses, initial purchase value understates true return.

Option 1: Use first-month revenue (conservative)

```

ROAS = First Month Revenue ÷ Ad Spend

```

Option 2: Use projected LTV (more accurate, but estimated)

```

ROAS = (Customers × Projected LTV) ÷ Ad Spend

```

Example:

• New customers: 25
• Projected 12-month LTV: $600
• Ad spend: $5,000
• LTV-based ROAS: (25 × $600) ÷ $5,000 = 3.0x

The "Fully Loaded" ROAS Problem

Platform-reported ROAS only counts ad spend. True cost is higher.

What to Include in "True Cost"

Fully Loaded ROAS Calculation

The fully loaded number is what actually matters for profitability.

Why Platform ROAS Doesn't Match Reality

Your Meta Ads Manager ROAS will almost always be higher than your actual ROAS. This isn't a bug—it's how attribution works.

Attribution Inflation Sources

The iOS 14.5 Problem

Privacy changes mean significant data loss:

• Many conversions not tracked at all
• Modeled conversions are estimates, not actual data
• Reported ROAS can be 20-40% off from reality

Solution: Cross-Reference with Business Data

Always compare:

• Platform-reported ROAS
• Shopify/e-commerce platform ROAS
• Bank deposits (ultimate source of truth)

Use platform ROAS for relative optimization (which campaign is better). Use business data for absolute profitability decisions.

Tracking ROAS Accurately

Essential Tracking Setup

CAPI Implementation

Server-side tracking closes the data gap from privacy changes.

Benefits:

• Captures conversions blocked by browsers
• More accurate match rates
• Better data for algorithm optimization

Implementation options:

• Platform integrations (Shopify, WooCommerce)
• Partner solutions (Zapier, Segment)
• Direct API implementation

Attribution Windows

Recommendation: Use 7-day click as baseline, compare to 1-day click to understand view-through impact.

ROAS Tracking Spreadsheet Setup

For hands-on tracking, a simple spreadsheet works:

Basic Structure

Example

Automation

For scale, use reporting tools that pull data automatically:

For advertisers running both Google and Meta, Ryze AI provides unified ROAS tracking across platforms—so you can compare true performance without switching between dashboards.

Improving ROAS

The Three Levers

ROAS improves when you increase revenue per dollar spent. Three levers control this:

Targeting Improvements

Creative Improvements

Landing Page Improvements

Tools for ROAS Optimization

For brands running both Google and Meta campaigns, Ryze AI helps optimize ROAS across platforms with unified AI-powered recommendations—applying learnings from one channel to improve the other.

Common ROAS Mistakes

ROAS Targets by Campaign Type

Different campaigns serve different purposes. Set targets accordingly.

Key insight: Expecting 8x ROAS from prospecting campaigns is unrealistic. Different funnel stages have different efficiency levels.

Quick Reference: ROAS Formulas

FAQ

What ROAS should I target?

Calculate your break-even ROAS first (1 ÷ profit margin). Your target should be above break-even, accounting for LTV and growth goals. A 4:1 ROAS is a common benchmark, but your specific margins determine what's actually profitable.

Why is my platform ROAS higher than my actual ROAS?

Attribution inflation. Platforms use view-through conversions and longer attribution windows to claim credit for sales. Always cross-reference with your e-commerce platform and bank deposits.

How do I calculate ROAS for lead generation?

Estimate lead value (Customer LTV × Lead-to-Customer Rate), then calculate: (Number of Leads × Lead Value) ÷ Ad Spend.

Should I use the same ROAS target for all campaigns?

No. Retargeting should have higher ROAS targets (6-12x) because audiences are warmer. Prospecting can have lower targets (2-4x) because you're building awareness.

How often should I check ROAS?

Weekly minimum for optimization decisions. Daily monitoring for anomalies. Don't make major changes based on single-day fluctuations.

Bottom Line

ROAS calculation is simple: Revenue ÷ Ad Spend. Getting accurate numbers and making smart decisions from them is the hard part.

Key principles:

1. Know your break-even ROAS (1 ÷ profit margin)
2. Don't trust platform ROAS blindly—cross-reference with business data
3. Calculate fully loaded ROAS including agency, creative, and tool costs
4. Set different targets for different campaign types
5. Improve ROAS through targeting, creative, and landing page optimization

For cross-platform advertisers, unified tracking and optimization tools like Ryze AI help ensure you're measuring and improving ROAS consistently across Google and Meta—rather than optimizing in silos with inconsistent data.

The goal isn't maximum ROAS—it's maximum profit at scale. Sometimes accepting slightly lower ROAS to capture more volume generates more total profit than chasing efficiency on a smaller budget.