ROAS (Return on Ad Spend) measures advertising efficiency by dividing revenue generated by ad spend. A 4:1 ROAS means every £1 spent on ads generates £4 in revenue. This free calculator computes ROAS from your campaign data and shows whether your advertising is profitable after accounting for product costs and margins.
Key Takeaways
- ROAS formula: Revenue from Campaign ÷ Cost of Campaign = ROAS
- Good ROAS: 4:1 or higher for most e-commerce; varies by margin
- ROAS vs ROI: ROAS measures revenue return; ROI measures profit return
- Break-even ROAS: Calculate based on your profit margins—higher margins allow lower ROAS
What Is ROAS?
ROAS (Return on Ad Spend) measures how much revenue you generate for every pound spent on advertising. It answers the fundamental question: “Is this advertising profitable?”
ROAS is expressed as a ratio or multiplier. A ROAS of 4 (or 4:1) means £4 revenue for every £1 in ad spend. Higher ROAS indicates more efficient advertising.
How to Calculate ROAS
Formula: Revenue from Ad Campaign ÷ Cost of Ad Campaign = ROAS
Example:
- Campaign spend: £2,000
- Revenue generated: £10,000
- ROAS: £10,000 ÷ £2,000 = 5 (or 5:1)
This campaign generates £5 for every £1 spent—generally considered strong performance.
What Is a Good ROAS?
A “good” ROAS depends entirely on your profit margins. The common benchmark of 4:1 assumes roughly 25% profit margins. Calculate your break-even ROAS based on your actual margins:
Break-even ROAS = 1 ÷ Profit Margin
- 50% margin: Break-even ROAS = 2:1
- 25% margin: Break-even ROAS = 4:1
- 10% margin: Break-even ROAS = 10:1
Target ROAS above break-even to generate actual profit. How far above depends on business goals and growth stage.
ROAS vs ROI: What’s the Difference?
ROAS measures revenue return on ad spend specifically. ROI measures profit return on total investment including all costs. ROAS tells you if ads generate revenue; ROI tells you if the business is profitable.
A campaign can have positive ROAS but negative ROI if product costs, fulfillment, and overhead exceed the margin between revenue and ad spend.
How to Use This Calculator
- Enter your total ad spend for the campaign
- Enter total revenue attributed to the campaign
- Optionally enter your profit margin for profitability analysis
- Review calculated ROAS and profit metrics
Free tool by: John Isaacson, Digital Marketing Strategist
Last Updated: January 2026
